Finance minister warns of 10% cut in plan expenditure

With little space to shore up revenue, finance minister P Chidambaram on Monday told financial advisers (FA) of various ministries not to seek more money over and above what has been earmarked for each ministry in the 2012-13 Budget.

He warned the FAs that in a worst-case scenario, a 10 per cent cut in plan expenditure could be implemented depending on the fiscal consolidation road map that the Vijay Kelkar committee submits, said an official present at the meeting.

The Kelkar committee report is expected this week.

"His message was that there would be no revised estimates for this year... no supplementary grants and therefore, there should be no request for re-appropriation or augmentation from any ministry," said the official.

"Extra expenditure would be available only for schemes that are identified as critical by the Kelkar but that extra spending could mean a cut in plan expenditure of other ministries...say a 10 per cent cut," he quoted Chidambaram.

Every year, finance minister announces a certain expense for each ministry's plan scheme in the budget which are referred to as budgetary estimates (BE). During the course of the fiscal, it releases more outlay for select schemes through supplementary demand for grants in parliament provided it has been ratified by the FA, an official appointed by the finance ministry in the other ministries to track spending.

The supplementary grants in the past few years have ranged from Rs 50,000 crore to Rs 1 lakh crore and are recorded as revised estimates (RE).

The minister, said the official, argued that there was tremendous pressure on government resources, which required rationalisation and optimisation of resources to bring down fiscal deficit to 5.1 per cent of GDP in 2012-13.

Last May, the finance ministry announced a 10 per cent cut in non-plan expense for the current fiscal as part of austerity measures to contain the deficit. It also announced a ban on creation of new posts, curbs on foreign travel and on holding government functions in five-star hotels.

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