Finance ministry seeks nod for FY22 extra net spend of Rs 1.07 trillion

The Centre has sought Parliament’s consent to spend an additional Rs 1.58 trillion in the financial year ending March 31 (FY22). According to the third supplementary demand for grants tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha on Monday, Rs 1.07 trillion will be the net cash outgo while the remaining amount of Rs 50,947 crore will be through savings of enhanced receipts.

Some of the big items include Rs 14,902 crore for fertiliser subsidy and Rs 30,170 crore for credit-linked subsidy scheme houses for economically weaker sections. The Centre has also sought an additional outgo of Rs 13,050 crore for transferring Rs 20,000 crore to the National Investment Fund for the National Bank for Financing Infras¬tructure and Development as well as Rs 5,000 crore recapitalisation for insurance companies. However, this would only entail a cash outgo of Rs 4,950 crore.

The Centre is also seeking to infuse Rs 2,884 crore in regional rural banks (RRBs), which will involve a cash outgo of Rs 1,005 crore taking into account savings. As the government is set to extend the loan guarantee scheme for Covid-affected sectors by another three months, about Rs 50 crore has been sought as additional expenditure to provide guarantees. Another Rs 50 crore has been for the credit guarantee scheme for micro finance institutions.

As Business Standard had reported earlier, the Centre’s fertiliser subsidy burden for FY22 is set to rise even further as commodity prices remain high due to the ongoing Russia-Ukraine war. The fertiliser subsidy bill for FY22 was revised to Rs 1.4 trillion from a budgeted Rs 79,530 crore. It is expected to rise by at least Rs 10,000-15,000 crore. It is unclear if the additional fertiliser subsidy amount of Rs 14,902 crore is to fund subsidy burden over and above the FY22 Revised Estimate of Rs 1.4 trillion.

What will impact the Budget deficit is the fact that the much-awaited initial public offering of LIC will not take place this year. Whether higher-than-expected tax revenue receipts make up for that shortfall remains to be seen. “The higher expenditure in the final supplementary is likely to absorb the expected buoyancy in gross tax revenues above the RE. Nevertheless, a possible shortfall in capital spending may offset any spillover in the LIC IPO inflows to FY23,” said Aditi Nayar, chief economist at ICRA.

Meanwhile, Sitharaman said in Lok Sabha in a written reply that many states have sought an extension of GST compensation. The Centre’s view stands that the compensation will be given to states only till June. Though cess will be collected beyond that, it will be used to pay back the principal and interest of the compensation shortfall loans worth Rs 2.69 trillion that the Centre borrowed in 2020-21 and 2021-22, and transferred to states.