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FM may effect 20% Plan allocation cuts across ministries

With the government making all efforts to meet the FY15 fiscal deficit target of 4.1 per cent of gross domestic product, the finance ministry might announce steep Plan allocation cuts across various government departments.

Business Standard has learnt from multiple sources that on an average, key ministries, including those of agriculture, rural & urban development, and infrastructure, might see cuts of up to 20 per cent in Plan allocation compared to the FY15 Budget estimates.

“The reduction has been effected in many ministries, in varying degrees,” said a senior government official.

The Plan budgetary support outlay to various central government ministries and departments is Rs 2.37 lakh crore. A cut of 20 per cent, or about Rs 47,000 crore, means Finance Minister Arun Jaitley might present a revised estimate of about Rs 1.9 lakh crore for this financial year.

Apart from budgetary support, the estimate for internal and extra budgetary resources (IEBR) for this financial year is Rs 2.48 lakh crore. IEBR are resources raised by public sector undertakings and other government entities through profits, loans and equity.

Senior officials said in some cases, ministries had already spent their allocated funds within the first eight months of this financial year. Now, they were being informed of the cuts, with the ministry’s expenditure department telling them they wouldn’t be reimbursed for the spending.

In the case of the agriculture ministry, the Plan expenditure for FY15 has been cut 12-13 per cent. In the FY15 Budget, the ministry was allocated Rs 22,309 crore.

Officials said for ministries such as those of rural and urban development, the cuts could exceed 20 per cent.

Last month, Reuters had reported the health ministry’s Plan expenditure for FY15 was being cut about 20 per cent.

In the 2011-12, 2012-13 and 2013-14 Budgets, the United Progressive Alliance government had reduced Plan allocation 4.2 per cent, 19 per cent and 15 per cent from Budget estimates, respectively.

In the case of ministries and departments for which Plan expenditure accounts for a substantial part, officials have been instructed to adopt measures to cut spillovers.

Officials said for the food ministry, the subsidy requirement of the Food Corporation of India would exceed the FY15 Budget estimate of Rs 92,000 crore, adding the spillover wouldn’t be too high.

“Our subsidy requirement on this head for 2014-15 is about Rs 1,50,000 crore, which means the spillover will be about Rs 55,000 crore. However, it would have been much higher had the government not adopted some innovative means to control subsidies. These measures included not purchasing surplus grain from states that declared a bonus over and above the Centre-determined minimum support price,” said an official.

In November, the Centre had introduced a fresh round of austerity measures, including bans on first-class travel, creation of new posts and holding meetings at five-star facilities. All departments were told to effect 10 per cent cuts in non-Plan expenditure, excluding interest payment, repayment of debt, capital spending for defence, salaries, pensions and grants to states.

In his mid-year analysis of the economy last month, Chief Economic Advisor Arvind Subramanian had said the Centre’s tax revenue projections for FY15 had been overestimated by Rs 1.05 lakh crore. And, things don’t look bright on the disinvestment front, too. As reported earlier, plans to sell residual government stake in Hindustan Zinc and Balco for Rs 15,000 crore and in Axis Bank, ITC, and Larsen & Toubro (through the Specified Undertaking of Unit Trust of India) for Rs 6,500 crore have been shelved.

To generate more revenue, the Budget team at North Block might also consider avenues such as higher dividends from public sector undertakings. However, these steps might not be enough to offset the overall shortfall in other revenue.


  • After a 10% cut in certain non-Plan items, ministries told to reduce plan spending
  • On an average, 20% Plan budgetary cuts are likely across key economic and infrastructure ministries
  • Quantum of cuts different across ministries
  • Plan allocation cut in agri ministry around 12-13%; urban development and rural development could see cuts of more than 20%
  • FY15 Plan budgetary support outlay to central departments about Rs 2.37 lakh crore
  • Ministries that have already spent or are close to spending allocated amounts not to be reimbursed
  • Downward revision of 20% could save about Rs 47,000 crore


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