Finance ministry cuts MeitY allocation by 17% for FY27 amid underspending

Finance ministry cuts MeitY's FY27 allocation by 17% due to underspending in PLI, semiconductor and AI Mission schemes, with panel flagging concerns over fund utilisation

The finance ministry has cut the funds it will allocate to the Ministry of Electronics and Information Technology (MeitY) for the next financial year by about 17 per cent because of lower expenditure incurred during the first two quarters of the ongoing fiscal in areas such as the production-linked incentive (PLI) scheme and India AI Mission.

 

MeitY proposed Rs 28,169 crore for Financial Year 2026–27, but received only Rs 21,632 crore at the Budget Estimates stage, a reduction of nearly Rs 6,500 crore. The Budget Estimates for the ongoing fiscal were pegged at Rs 26,026 crore.

 

“The revenue provision in BE 2026–27 has been reduced by Rs 4,348.96 crore compared to BE 2025–26. The reduction in BE 2026–27 is especially due to the closure of the tenure of the ‘Large Scale Electronics Manufacturing (LSEM)’ component of the Production-Linked Incentive (PLI) scheme on March 31, 2026,” said the Twenty-Fourth Report of the Standing Committee on Communications and Information Technology, which was placed in Parliament on Monday.

   

The report also raised concern over the fact that MeitY failed to convince the finance ministry about securing the requisite amount of funds at the Budget Estimates stage.

 

MeitY, on its part, said the budgetary cut has been made due to lower expenditure incurred during the first two quarters of the current fiscal. Expenditure has been lower under schemes such as the Modified Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India, the Production-Linked Incentive Scheme (PLI) and the India AI Mission.

 

The government’s India AI Mission has also recorded low spending in the first two years, despite ambitious targets. The mission was launched with a total outlay of Rs 10,371 crore for five years. However, estimates over the last two fiscals have been lowered significantly and actual spending has been a fraction of the amount granted.

 

For example, during Financial Year 2024–25, the revised estimate for the mission was Rs 173 crore, of which Rs 19.2 crore was spent. In the current year, Rs 800 crore was earmarked, but the actual spend is about Rs 257 crore. Due to this, the finance ministry has reduced the Budget Estimates for the next fiscal by 50 per cent to Rs 1,000 crore.

 

“The Committee, while analysing the Demands for Grants, noted that the percentage increase in various Programme Heads and Major Heads over the last five years shows that Semiconductor Laboratory (SCL), Promotion of IT & ITeS Industries, India AI Mission and Production-Linked Incentive Scheme (PLI) have seen significant pruning of funds in FY2026–27 compared to FY2025–26, i.e., 16 per cent, 31 per cent, 50 per cent and 83 per cent, respectively. All of these programmes are vital for enabling the continuous development of the electronics and IT industry,” the report noted.