Supplementary demands for grants: FM Nirmala Sitharaman seeks House approval for extra spending of Rs 1.58 trillion

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Finance minister Nirmala Sitharaman on Monday sought parliamentary approval for an additional spending of Rs 1.58 trillion, as she placed the third batch of supplementary demands for grants for the current fiscal. This involves a higher-than-expected net cash outgo of Rs 1.07 trillion; the rest (Rs 50,946 crore) would be met through savings or enhanced receipts of various ministries and departments.

The government’s additional spending commitments for FY22 come at a time when its plan for the initial public offering of state-run LIC will most likely be deferred to the next fiscal. It was estimated to fetch over Rs 60,000 crore. Global crude oil prices, too, have shot up in the wake of the Ukraine crisis, which will pressure the government to reduce fuel taxes, apart from inflating its fertiliser subsidy bill. However, given the spurt in tax revenues and a likely cut in capital expenditure, some analysts expect the Centre to absorb spending pressure without jeopardising its fiscal deficit target of 6.9% of GDP for FY22. The impact of the surge in oil prices will be mostly felt next fiscal.

ICRA expects a modest upside of Rs 50,000-90,000 crore to the gross tax revenue collection in FY22, compared with the revised estimate (RE) of Rs 25.2 trillion. While the revised target for revenue expenditure for FY22 will likely be achieved, capex may end up undershooting the RE of Rs 5.5 trillion by Rs 40,000-60,000 crore. These factors will help absorb any shortfall in disinvestment receipts, if LIC’s IPO doesn’t materialise this fiscal, according to the agency’s estimate. Importantly, the Centre still has some fiscal leeway to absorb a fair amount of extra spending commitment (fiscal deficit until January was only 59% of the RE for the full year, against 68% a year before). Gross revenue receipts till January rose 48% from a year before; revenue expenditure rose just 10% and capex 22%.

Some of the key proposals involving the extra net cash outgo under the third batch of supplementary demands were for the payment of urea subsidy (Rs 14,902 crore); for the new development financial institution, called NaBFID, and recap of state-run insurers (Rs 13,049 crore); and for contributions to and grants for the Employees’ Pension Scheme (Rs 9,211 crore); for the National Investment Fund and recapitalisation of regional rural banks (`7,214 crore); for grants for the creation of capital assets for state governments under the Pradhan Mantri Awas Yojana (Rs 8,353 crore); and grants for NaBFID and support to lenders for the waiver of compounded interest on loans (Rs 5,000 crore).

Importantly, approval for additional spending of as much as Rs 30,170 crore is sought for credit-linked subsidy scheme under the PM Awas Yojana (Urban), and for settling the loan taken by Building Materials and Technology Promotion Council from the National Small Savings Fund, among others.

The demands include a total of 77 grants and one appropriation.

Sitharaman had already sought the House nod for additional expenditure of Rs 5.6 trillion, as part of the first and second batches of supplementary demands for grants for FY22. These involved a net extra cash outgo of Rs 3.2 trillion.

The Centre had budgeted a total expenditure of Rs 34.8 trillion in FY22 and a tax receipt of Rs 15.5 trillion. However, both spending and revenue mop-up have beat the estimates by wide margins. In the revised estimate, it pegged the total expenditure at Rs 37.7 trillion and net tax revenue of Rs 17.7 trillion.