Additional Grant Requests: FM Nirmala Sitharaman Seeks House Approval for Additional Expenditure Rs 1.58 Trillion

The government’s additional FY22 spending commitments come at a time when its plan for a state-run LIC initial public offering will most likely be delayed until next fiscal year.

Finance Minister Nirmala Sitharaman on Monday sought Parliament’s approval for an additional expenditure of Rs 1.58 trillion, as she placed the third batch of additional grant applications for the current financial year. This implies a higher than expected net cash outflow of Rs 1.07 trillion; the rest (Rs 50,946 crore) would be covered by savings or improved revenue from various ministries and departments.

The government’s additional FY22 spending commitments come at a time when its plan for a state-run LIC initial public offering will most likely be delayed until next fiscal year. It was estimated at over Rs 60,000 crore. Global crude oil prices have also risen in the wake of the Ukraine crisis, which will prompt the government to cut fuel taxes, in addition to inflating its fertilizer subsidy bill. However, given the surge in tax revenues and a likely reduction in capital spending, some analysts expect the Center to absorb spending pressures without jeopardizing its budget deficit target of 6.9% of GDP. for FY22. The impact of soaring oil prices will be most felt in the next fiscal year.

ICRA expects a modest rise of Rs 50,000 to Rs 90,000 crore for gross tax revenue collection in FY22, from the Revised Estimate (RE) of Rs 25.2 trillion. rupees. While the revised FY22 revenue expenditure target will likely be met, capital expenditure may end up falling below the Rs 5.5 trillion ER by Rs 40,000-60,000 crore. These factors will help absorb any shortfall in divestment proceeds, if LIC’s IPO does not materialize, the agency estimates. It is important to note that the Center still has budgetary room for maneuver to absorb a good part of the additional expenditure commitments (the budget deficit until January was only 59% of the ER for the whole of the Center). year, compared to 68% a year earlier). Gross receipts through January were up 48% year-on-year; revenue expenditure increased by only 10% and investment expenditure by 22%.

Some of the major proposals involving the additional net cash outflow under the third batch of additional demands concerned the payment of the urea subsidy (Rs 14,902 crore); for the new development finance institution, called NaBFID, and recap of public insurers (Rs 13,049 crore); and for contributions and grants for the Employees Pension Scheme (Rs 9,211 crore); for National Investment Fund and Recapitalization of Regional Rural Banks (`7,214 crore); for Capital Establishment Grants for State Governments under the Pradhan Mantri Awas Yojana (Rs 8,353 crore); and grants for NaBFID and support to lenders to waive compound interest on loans (Rs 5,000 crore).

It is important to note that approval of additional expenditure of up to Rs 30,170 Crore is being sought for the Credit Linked Grant Scheme under PM Awas Yojana (Urban) and for the settlement of the loan contracted by the Council of promotion of building materials and technology with the National Small Savings Fund, among others.

Applications include a total of 77 grants and one credit.

Sitharaman had already sought the green light from the House for additional spending of Rs 5.6 trillion, under the first and second batches of supplementary grant requests for FY22. These involved additional cash outflow net of 3.2 trillion rupees.

The Center had budgeted a total expenditure of Rs 34.8 trillion for FY22 and a tax revenue of Rs 15.5 trillion. However, the catch-up in expenditure and revenue far exceeded estimates. In the revised estimate, he pegged total expenditure at 37.7 trillion rupees and net tax revenue at 17.7 trillion rupees.

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