Austerity measures: Curbs on foreign travel on the way

Ban on purchase of new cars by departments likely, except those for defence purposes

Finance Minister Pranab Mukherjee on Friday hinted there could be curbs on foreign travel and holding conferences in five-star hotels by ministers and officials. He also said the austerity measures might include a ban on purchase of new cars by departments, except those for defence purposes.

The measures are aimed at cutting expenditure to ensure the Budget target of reining in the fiscal deficit at 5.1 per cent of gross domestic product (GDP) could be met in the current financial year. Officials and private sector players in the automobile industry said a ban on purchasing new cars would not save much. They said the measures were more of a signal that the government was serious about cutting the fiscal deficit.

The finance minister said there could also be 10 per cent cuts in the budget for holding seminars and workshops.

Pravin Shah, chief executive (automotive division), Mahindra & Mahindra, said, “The proportion of sales to the central government is insignificant when compared with our overall volumes. The ban on purchasing new vehicles will not have much impact on us. State governments have their own budgets and plans; some orders come from these as well.” A spokesperson at Tata Motors agreed, but declined to share the number of cars the company supplied to the central government.

Officials said the ban on purchasing new cars would primarily be applicable to departments and ministries, but the government would also advise public sector units to follow suit.

Maruti Suzuki said the company leased about 600 vehicles annually to public sector undertakings.

Officials said, “The austerity drive would be divided into two parts. First, there would be a cut in establishment expenses. Then, there could be a cut in scheme-wise expenses as well.”

A detailed plan had to be worked out for expenditure rationalisation, the officials said, adding a decision on scheme-wise expenditure would be taken after consulting various ministries. It would be insisted that the current expenditure be spent first, before additional allocations were made for various schemes.

An internal finance ministry memorandum has already asked officials to discontinue the practice of sending more than one officer in foreign conferences and seminars. It asked the officials to rely on those from the local embassy to strengthen participation.

The memorandum added the ministry had enlarged the network of foreign customs and income tax units, officials of which could be utilised for covering events relating to the finance ministry.

The finance ministry had, last year, imposed a ban on creating new government posts and asked all government departments to cut all unavoidable expenditure, including seminars and conferences at five-star hotels or abroad, purchase of new vehicles, foreign travel and appointment of consultants.

It also sought discipline in fiscal transfers to states, saying unspent balances would be taken into account before additional releases. Finance ministry officials said most of these measures were likely to be reintroduced as austerity measures. In a written reply in the Lok Sabha on Friday, Minister of State for Finance Namo Narain Meena said the government may issue orders for strict compliance of the austerity measures effected last year.

However, expenditure compressing measures announced in the previous financial year were not known as austerity steps. Austerity measures were announced in September 2009, when the country experienced severe drought.