Stating that “government finances are finite”, Finance Secretary Ashok Lavasa has directed all ministries to henceforth suggest alternative ways to fund new centrally sponsored schemes proposed by them.
In a letter sent this month, Lavasa has said that ministries should ensure that any new proposal for the approval of the Expenditure Finance Committee (EFC) and Public Investment Board (PIB) should also suggest which existing schemes or their component can be dropped to help arrange finances for the new one. The financial viability of a new scheme or proposal is appraised by either the EFC or PIB before its goes to the Union Cabinet for approval.
If the ministry cannot find a way to replace an old scheme with a new one, then its plan should propose ways to generate additional revenue at its end to support the new scheme.
The letter, accessed by The Indian Express, states, “As you are aware, government finances are finite and we should use them in a manner that avoids spreading of resources too thinly and utilises the available resources most productively.
“Hence, it may please be ensured that any proposal for new EFC/PIB, even if based on government announcement,
should come with matching savings identified by dropping some existing scheme(s) or their component that have outlived their useful purpose or failed to deliver expected results, or with a proposal from ministry/department to generate additional revenue (PPP model, user charges, asset exploitation, including its lease/sale, exploiting advertisement potential, etc) at its end to support the same. The ministry could also show commensurate saving by implementing DBT.”
DBT is short for Direct Benefit Transfer programme, through which the government transfers cash subsidies directly to beneficiaries’ bank accounts. DBT aims at plugging leakages and helping the government save money in implementing subsidy schemes.
Lavasa’s letter also said that this was part of the effort towards “fiscal consolidation” under which the government has already reduced both central sector and centrally sponsored schemes from 72 to 30.