The ministries are empowered to devise schemes with expenditure commitment of up to Rs 500 crore.

Amid dwindling tax revenues and calls for the government to refrain from pruning budgeted productive spending to tide over the Covid-19 impact, the finance ministry on Thursday asked various ministries and departments to submit proposals for the first batch of supplementary demand by June 29 for clearance during the monsoon session of Parliament.

However, in an office memorandum, the Department of Economic Affairs made it clear that cash supplementary shouldn’t be proposed, as the Budget allocation was made available since April.

The proposals could be about immediate requirement of additional funds, which can be met by re-appropriation of savings in the grant but require Parliamentary clearance. These could also be about the cases where the advance from the contingency fund has already been granted for payments against court decrees.

Already, with the recently-announced stimulus package inflating the Centre’s Budget expenditure in FY21 by 1% of the GDP amid the possibility of a huge revenue deficit, the Centre is leaving no stone unturned to rein in low-priority expenses. The expenditure department in the finance ministry this month directed all ministries and departments to suspend spending on most new schemes, including self-approved ones, for FY21 and not to initiate any fresh schemes for at least a year. The ministries are empowered to devise schemes with expenditure commitment of up to Rs 500 crore.

The DEA’s memorandum also indicated the government’s focus on re-prioritising expenditure from relatively less important to the more crucial ones in times of the pandemic. The total Budget expenditure was estimated (BE) to be Rs 30.4 lakh crore in FY21.

The Centre is keen to re-prioritise the expenditure to restrict the widening of the fiscal deficit in FY21. Already, the deficit in FY20 turned out to be 4.6% of the GDP, versus budgeted (RE) 3.8%, as the Centre had faced a 9.4% shortfall in receipts from the revised estimate level, and still had to keep the spending at over 99% of the RE level.

The Centre has upped the gross borrowings for FY21 by 54% to Rs 12 lakh crore. Its budgeted fiscal deficit, inclusive of the fiscal stimulus and likely revenue shortfall, is seen to be about 7-8% of the GDP this fiscal.

Also, by asking some departments to restrict Q1 spending to 40% of the usual level, the Centre is looking to save nearly Rs 1.4 lakh crore; another Rs 25,000 crore is being saved by freezing the dearness allowance increase of its employees for FY21.

Expenditure secretary TV Somanathan recently told FE that some forms of spending restrictions and categorisation might continue in Q2 as well.