Staring at a huge fiscal deficit, the finance ministry has said it would not release fresh funds to autonomous bodies or non-government organisations unless they certify that the money provided to them in the past has been used.
"It has been decided that Grants-in-aid should not be released to any autonomous body or NGO or any other organisation/institution (other than state governments) if it has not submitted all Utilisation Certificates due to rendition, for grants-in-aid released by the Central government in respect of all its schemes," Finance & Expenditure Secretary RS Gujral said in an Office Memorandum.
The issue of discipline in fiscal transfers to autonomous bodies at Central, state and local level has been discussed in pre-Budget meetings held in the Ministry of Finance with other government departments.
The directive would come into force with immediate effect and any deviation from it would require specific approval of the finance ministry.
The Finance Ministry has already increased the fiscal deficit target for 2012-13 to 5.3% of the GDP from 5.1% estimated in the budget. Kelkar panel had cautioned that fiscal deficit could touch 6.1% if no measures were taken by the government.
Fiscal deficit was 5.8% in 2011-12 while economic growth slipped to nine-year low of 6.5%. The economic growth is expected to fall further this year. Earlier this month, Standard & Poor's had warned that India had one-in-three chance of a downgrade to junk.
The finance ministry is working out a fiscal reduction plan that involves cutting expenditure, utilising savings from social sector schemes, keeping supplementary demands to the bare minimum, rationalising subsidies and shifting some of the last quarter liability to next financial year.