Business Standard

FM wields the axe on allocations

Before Budget, departments see outlays shaved

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Finance Minister has had a drastic haircut. A curious reporter asked him why. “Well, I can’t cut expenditure”, he grinned, “so I cut the only thing I had control over — my hair”.

That was a joke. But the fact is, several ministers have begun grumbling privately about the budgetary cuts their departments are being subjected to ahead of Budget 2013-14. “He (Chidambaram) is running through the corridors of Shastri Bhavan and Udyog Bhavan with a machete,” groused one minister. Last week, the agriculture ministry found Rs 3,000 crore shaved from its Rs 20,000-crore budget because “the department’s spending pattern does not warrant the outlay”. The Rashtriya Krishi Vikas Yojana, supposed to ‘incentivise states to increase public investment in agriculture and allied sectors’ will have zero outlay for this quarter. The will receive no funds, either. And, the seeds division, tasked with providing money to state governments to subsidise seeds, will get a fraction of the funds it was supposed to.

At the heart of this financial ferocity is an unpublicised meeting of Chidambaram with the council of ministers before the winter session of Parliament where he briefed his colleagues on the state of the economy. Armed with a PowerPoint presentation, he explained India had a deficit of over five per cent of GDP. If drastic spending cuts were not undertaken and the Indian economy’s credit rating was downgraded to ‘junk’, India, as we know it, would cease to exist, he told his colleagues, adding the plans for inclusive growth would have to be written off. All ministers were asked to sign off on an extensive expenditure cut plan. He also sought suggestions.

DRASTIC CUTS
  • 13% Cut in higher education  outlay
  • Rs 10,000 cr Cut in defence budget outlay (both revenue and capital)
  • 24% Outlay cut for tribal affairs ministry
  • Rs 3,000 crore: Slashed from the agriculture outlay of Rs 20,000 crore

The cut in fuel subsidies and sale of land held by the Railways and the Port Trust were some options discussed at this meeting. The recent increase in fares by the was part of the same plan.

Chidambaram is conscious that a political outcry against expenditure cuts could undermine his position in the party and the very discipline he is trying to enforce. So, the same presentation was made at the meeting and the party’s Chintan Baithak at Suraj Kund earlier this year, so that his proposals had political sanction, too. This approach is also expected to be reflected at the Jaipur meeting of the party next weekend.

A minister said the Food Security Bill, the benefits transfers scheme and woman-centric proposals were likely to take centre stage in the Budget.

But, he said, the Jaipur meeting of the Congress would see the party underwriting more hard decisions as well. Reduction of the fuel subsidy could be one of those.

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