Focus on capex: Centre removes monthly spend caps

The move is in contrast with the announcement of curbs on expenditure imposed from April last year after the pandemic broke out.

To keep the momentum of economic activity amid the spike in Covid infections, the Centre on Thursday announced removal of quarterly and monthly expenditure ceilings for various departments with regard to capital expenditure.

The objective of the latest directive is to facilitate allocation of additional funds from the department of economic affairs’ discretionary corpus of Rs 44,000 crore to those departments who show good progress in capex.

The move is in contrast with the announcement of curbs on expenditure imposed from April last year after the pandemic broke out.

“To enable ministries/departments expedite capital expenditure, the cash management guidelines issued by the ministry….stand relaxed. Monthly expenditure plan/quarterly expenditure plan ceilings and restrictions on bulk expenditure items referred to in the office memorandum dated August 21, 2017, shall not be applicable for expenditure under the capital heads under the budget,” the finance ministry said. These relaxations shall take immediate effect and shall apply until further orders, it added.

In the business-as-usual scenario, the departments are allowed to spend about 25% of their respective BEs in Q1, Q2 and Q3 subject to quarterly and monthly plans approved by the finance ministry. Some departments were even allowed to spend more than 25% in a quarter subject to prior approvals. Not more than 33% and 15% of BE is permissible, respectively, in Q4 and last month (March) of a financial year. The latest order removes these ceilings as far as capex is concerned.

According to extant norms, to the extent possible, the bulk expenditure items of more than Rs 2,000 crore were timed in the last month of each quarter to utilise the direct tax receipt inflows in June, September, December and March. The funds were released within 17th and 25th in these months. Similarly, big releases of Rs 200 crore to Rs 2,000 crore were timed between 21st and 25th of a month to take advantage of the GST inflows. These restrictions have been removed.

For FY22, the Centre has allocated Rs 5.54 lakh crore for capex, which is 26% higher than revised estimate of Rs 4.39 lakh crore for FY21. “Of this, I have kept a sum of more than Rs 44,000 crore in the Budget head of the department of economic affairs to be provided for projects/programmes/departments that show good progress on capital expenditure and are in need of further funds,” finance minister Nirmala Sitharaman said in her Budget speech on February 1.

The financial advisers of the ministries/departments shall ensure just-in time releases to avoid idle parking of funds at all levels, the finance ministry said in the latest order.