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Finance ministry asks depts to cut expenses

Hemmed in by the precarious state of public finances, the government on Wednesday asked departments to submit plans to slash expenditure on insignificant activities by up to 10 per cent in the next financial year (2010-11).

business Updated: Sep 16, 2009 23:54 IST
HT Correspondent

Hemmed in by the precarious state of public finances, the government on Wednesday asked departments to submit plans to slash expenditure on insignificant activities by up to 10 per cent in the next financial year (2010-11).

“It is necessary to review the existing expenditure budget... to prioritise the activities and schemes, both on the plan and non-plan side and identify those activities and schemes, which can be eliminated or reduced in size or merged with any other scheme,” the finance ministry said in a circular issued on Wednesday to all departments as it formally began preparations for next year’s general budget.

It said the estimates must conform to recent instructions on expenditure management that includes a ban on business or first class air travel by government officials.

The finance ministry made it clear that no new plans should be drawn up to fill posts that are lying vacant for more than one year.

“No provision may be made in the establishment budget for posts, which are lying vacant for one year or more. Even otherwise, provisioning for vacant posts should be made with circumspection so as to avoid chances of eventual savings due to these vacant posts not being filled up,” the circular said

Last week, the finance ministry had asked all ministries and departments to cut expenditure by 10 per cent in travel expenses, publications, professional services, advertising and publicity, office expenses, fuel and other administrative expenses.

The remaining portions of non-plan expenditure, excluding interest payments, repayment of debt, defence capital, salaries, pension and the Finance Commission’s grants to states, will be subjected to a mandatory five per cent cut.

Government expenditure is classified under two broad heads — plan and non-plan.

Funds spent on productive asset creation through programmes and schemes are termed “plan” expenditure, while “non-plan” is a generic term that refers to all expenditure, including establishment and maintenance activities, of the government not included in the five year Plan.

The government has budgeted for a fiscal deficit of Rs 4 lakh crore or 6.8 per cent of GDP in the current year (2009-10) with a total expenditure of Rs 10. 20 lakh crore.