People stand in a queue to buy liquor outside a wine shop at Sion, Mumbai.

MAHARASHTRA, the state worst-hit by the Covid-19 pandemic in the country, Monday declared a freeze on new capital works till March next year.

The state, whose Budget size is the second biggest after Uttar Pradesh, imposed a 67 per cent cut in development (scheme) spend for 2020-21. “This is the deepest ever cut in expenditure since the state was formed in 1960,” an official said.

As on date, the state had 12,974 confirmed Covid cases, accounting for 30 per cent of all cases in the country, and had registered 548 deaths, almost 40 per cent of all deaths in the country, according to the Ministry of Health and Family Welfare.

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Less than two months back, the Shiv Sena-NCP-Congress government had presented a Rs 4.34 lakh crore budget for 2020-21, an increase of 4.1 per cent over the revised estimate for 2019-20. The only other state with a bigger budget than Maharashtra is Uttar Pradesh

The capital outlay (spending which leads to asset creation) was estimated at Rs 45,124 crore for this year, 2.6 per cent lower than in 2019-20.

Barring procurements of infrastructure and items required for combating the pandemic, the state has ordered departments to withhold tenders for new purchases and approvals for new development works. To ensure continuity in administration during the outbreak, it has also put a stop on all departmental transfers.

As the country entered its third phase of the nationwide lockdown, Maharasthra’s Finance Department estimated its own loss in tax revenues of about Rs 50,000 crore. For the current financial year, the state’s own tax revenues were budgeted at Rs 2,25,071 crore. Senior officials said the losses were only likely to increase further.

State Finance Minister Ajit Pawar had earlier approached the Centre seeking a Rs 50,000 crore package for the state economy. The Centre has not committed anything so far.

People sit in queues as they wait for a medical check-up at Navi Mumbai Municipal Hospital on Monday. (Express photo by Narendra Vaskar)

Projecting the economic situation to remain gloomy this year, and a sharp erosion in its own revenues, the state government has stayed all new works except “operational expenses” for COVID-19 control measures. Till the time that the curbs are lifted, only five departments – public health, medical education, food and drug administration, food and civil supplies, and relief and rehabilitation – have been authorised to commit to new spending. But even they will be required to restrict themselves only to purchases for combating the outbreak.

Besides the 67 per cent cut in scheme expenditure, the state has also frozen fresh recruitment till further orders.

“Department secretaries have been asked to review all ongoing schemes. Only those that are unavoidable will be taken up on priority. Some others will be stayed. Others that can be avoided will be cancelled,” said a senior official.

For Centrally-sponsored schemes (CSS), departments have been asked to sit for a collective review with the finance department. “Cuts in expenditure on CSS would depend on the amount of the state’s share and also the scheme’s overall importance,” the order stated. Departments have also been barred from releasing funds to loss-making corporations for now.

Objecting to development funds lying unspent with departments or such corporations, Mehta asked the finance department not to release new grants till these are either surrendered or utilised.

The austerity drive has cast a shadow on the state’s farm loan waiver scheme. While the implementation of the first scheme — where loan arrears between April 2015 and March 2019, totalling Rs 2 lakh, were waived — has been stalled midway, a new one-time settlement scheme for farmers with arrears over Rs 2 lakh and another incentive scheme for regular farm loan payers, both announced by Pawar in his Budget speech, are yet to take off.

Further, departments have been asked to cap administrative expenses at 75 per cent of the budgeted amount, with restrictions announced for expenditure on office renovation, stationery, consultancies, and rents among others. Departments have been asked to prioritise spending on committed non-developmental liabilities, including salaries, wages, pensions, and servicing of debt.