Coronavirus lockdown: Govt may extend window to reconcile expense receipts

The government is likely to extend the window to reconcile expenditure receipts from various departments beyond March 31.

This has an implication, however, since it will also impact how soon the finance ministry can come out with its borrowing calendar for the first half of 2020-21, a decision that is of enormous significance for the markets. Normally the borrowing calendar for the succeeding financial year is issued before 31 March, every year.
 

The reason for the longer window is that a lot of government support to fight the COVID-19 pandemic could come unstuck if the rules are adhered to, strictly.
 

The finance minister has postponed the dates of all returns and statements that businesses need to file to later in the year. Relaxation of the accounts closing date could help deal with these extraordinary times.
 

For instance, states have been told to reprioritise expenditure to cater to the ongoing public health emergency. “This is difficult for them to do when they are finalising the accounts for the financial year which is about to end on March 31,” said a senior government officer.
 

The expenditure department issued a circular to all departments on Monday, noting that “in certain sectors, the expenditure systems may have to function more quickly than normal to cope with the emerging needs”. It has also designated all offices of the Controller General of Accounts as ‘essential services’.
 

In the usual scheme of things, April is always a tough month for government finances. Tax receipts dwindle from every source, so the finance ministry has to depend on front-loading of its borrowing to meet the committed expenditure. For example, in 2019-20, it raised Rs  1.8 trillion in April and May — almost 25 per cent of its projected borrowing for the first six months of the year.  Over the past decade, the government has tightened the rules to stop departments from flooding the system with bills in the last month of the financial year. Instead, departments have been encouraged to front-load their expenditure and stop sending up bills in March, especially, in the last week of the month.
 

In a study on the phenomenon over several years, the Comptroller and Auditor General had noted that in one case, “Twenty-two per cent of the total expenditure (for the year) was incurred in the month of March…The bunching of expenditure in the case of non-Plan expenditure was even higher, at 24 per cent of the total annual non-Plan expenditure in the last month of the financial year.”
 

This year, when the country is grappling with the COVID-19 outbreak, it is felt that there is a need to allow some leeway. The departments are working with fewer staff and, given the emerging requirements, there is every possibility that the bills will not be ready in time.  However, the ministry has warned that the “absence of staff shall not be a reason for any delay or non-functioning of the payment and accounting systems.”  On March 31, pay and accounts officers and their support staff usually work through the night to make the bills go through.