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FinMin tightens purse strings ahead of B-Day
January, 11th 2007

Seven weeks before budget presentation for 2007-08, the Finance Ministry has taken a slew of measures to tighten purse strings, avoid last minute bunching of expenditure proposals and banned issue of cheques on March 31, last day of this financial year.

Expenditure Secretary Sanjiv Mishra has capped the expenses that can be incurred by various government departments and ministries in the last month (March 2007) to 15 percent of estimated total expenses at Rs 563991.13 crore for the entire financial year.


Last quarter expenses capped to 33 % of budget estimates
March 2007 outgo curbed to 15 %
Issue of cheques on March 31, 2007 banned
Cheque payments to be replaced by e-transfers in all ministries
e-payment and e-procurement to cover all departments
No advance payments during March 2007 on fresh proposals 

In a three-page missive sent to all central government secretaries, financial advisors and expenditure control authorities early last week, Dr Mishra has made it mandatory for adhering to the latest expenditure norms.

Following a review of expenditure trends in various departments as part of the pre-budget exercise, Finance Ministry has imposed an upper ceiling of 33 percent on expenses that can be incurred in the last quarter, i.e . January March 2007.

This will give Finance Minister enough elbow room in sprucing up his financial statement while presenting the budget next month end. The latest norms would also enable Chidambaram to reconcile a major chunk of expenses made on the UPA Government's flagship programmes like Bharat Nirman etc.

Expenditure Secretary has also directed the various departments to drastically reduce the unspent balances and observe strict vigil on the outgo.

As a follow up of Finance Minister's announcement in this financial year's budget on cash management, Sanjiv Mishra has asked all departments "to introduce e-banking and e-procurement immediately".

Finance Ministry officials said that this will reduce the holding up funds at different levels and reduce the unpaid bills for goods and services, un-discharged liability under government contracts and minimizing the carry forward of these liabilities to next financial year.

North Block has imposed a mandatory ban on issue of cheques on last day of the financial year, i.e. March 31 by ministries in order exhaust the allocated funds. The ministries and departments have been advised to switch over to electronic transfer of payments at the earliest.

The UPA Government has also banned release of funds towards advances during March 2007 to curtail last minute expenditure. However, this ban does not extend to payments on goods and services or meeting contractual obligations under various government infrastructure projects.

Adhoc release of funds has been banned beginning next financial year, i.e.2007-08. Expenditure Secretary has directed that a staggered four-installment payments system must be put in place to curtail front-loading of spending government funds.

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