india

Updated: Feb 14, 2020 09:58 IST

The Madhya Pradesh government has imposed a 50% ceiling on expenditure for February and March, except on essentials such as salaries and scholarships, to meet the revenue shortfall expected after the Centre reduced its share of central taxes by one percentage point, according to a circular.

A state government official, who was not willing to be named, said the ceiling imposed was 10% in the previous years. The official gave three reasons behind the state government’s directive to curtail expenditure.

First, he said, was the revenue shortfall of Rs 14,233 crore after the Centre reduced the state’s share to 41% as against earlier 42% on interim recommendations of the 15th Finance Commission.

The second was the financial constraint as the state implemented the second phase of farm loan waiver (of loan up to Rs 100,000) from December 2018. And the third was the lesser than anticipated revenue generation in the previous budget.

The finance department issued an internal fiscal management circular to all the departments on February 11, saying that only half of the unspent money can be used in the last two months of the current financial year.

The ceiling can be breached only if the departments have to perform mandatory expenditure on salary, allowances, scholarships and important government schemes.

The order also stated that there will be no approval for conducting seminars, workshops and other government programmes in five-star hotels and there would be a ban on payment after seven days of the order if the departments have purchased gadgets and vehicles prior to the order of the finance department.

“The finance department’s circulars on austerity measures and a ban on purchases particularly during the last quarter of every the financial year is nothing new but what is unusual this time is the ceiling put on the expenditure,” the official cited above said.

The central government had issued a similar austerity measure order for the ministries in December 2018 imposing an expenditure ceiling of 15% for the last quarter of the current financial year with some exemptions.

The MP government official quoted above said since economic activities had suffered a lot in the state, revenue too came down considerably. For instance, the revenue collection against stamp duty would be less by about Rs 500 crore due to less number of registry on the sale and purchase of land.

Similarly, the government is also expecting a shortfall in excise revenue despite an increase in excise tax in December 2018.

The officer said, “The desperate measures regarding austerity and ceiling on the expenditure are necessitated to avoid a situation of overdraft. The government is already reeling under debt of about Rs 1.75 lakh crore.”

In the state budget for 2019-20, the government has pegged the total expenditure to be around Rs 228,888 crore and revenue of Rs 181,979 crore.

“We will be far behind the revenue target,” the official said, without giving the number of the expected shortfall.

To further put a check on expenditure, the government has also constituted a committee of secretaries to recommend schemes which could be scrapped in the next budget.

The committee has to submit its report within a week after consulting all departments, said a second state government official.

“The state is facing difficulties on the front of finances due to the central government cutting down on the state’s share in central taxes by more than Rs 14,000 crore,” the state finance minister, Tarun Bhanot, said in Jabalpur.

State Congress spokesperson JP Dhanopia said, “First the BJP government in Madhya Pradesh left empty coffers for the Congress government and now the central government of the BJP is further causing problems to the state government for political reasons.”

The Bharatiya Janata Party hit back at the Congress-led government, saying it has indulged in unnecessary spending.

“The dichotomy in the Congress government’s approach is whereas the CM, his ministerial colleagues and other Congress leaders are talking of a financial crisis and blaming the BJP for everything all the time, the government has no problem in spending more than Rs 50 crore for IIFA award function to be held in Indore,” the spokesperson of the BJP’s state unit, Hitesh Bajpai, said.

“It has no problem with spending crores of rupees on the renovation of ministers’ bungalows and it has no problem in massive transfers and postings of the government employees, which caused the financial burden to the government,” Bajpai added.