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Expenditure Management - Economy Measures and Rationalisation of Expenditure
November, 12th 2014
                                 Government of India
                                 Ministry of Finance
                              Department of Expenditure
                                                                   _/~ North Block,
                                                       New Delhi,1-'r' October, 2014

                              OFFICE MEMORANDUM

     Subject: Expenditure    Management - Economy  Measures and
              Rationalisation of Expenditure.

                Ministry   of Finance, Department           of Expenditure       has been
'"   issuing austerity instructions from time to time with a view to containing
     non-developmental expenditure and releasing of additional resources for
     priority   schemes. The last set of instructions            was issued on         is"
     September 2013 after passing of the Union Budget. Such measures are
     intended     at promoting      fiscal    discipline,    without     restricting   the
     operational efficiency of the Government.           In the context of the current
     fiscal situation, there is a need to continue to rationalise expenditure and
     optimize     available   resources.     With this      objective,    the    following
     measures for fiscal prudence and economy will come into immediate

     2.1        Cut in Non-Plan expenditure:

                For the year 2014-15, every Ministry / Department shall effect a
     mandatory 10% cut in non-Plan expenditure excluding interest payment,
     repayment     of debt, Defence capital, salaries, pension and Finance
     Commission      grants to the States.       No re-appropriation           of funds to
     augment the Non-Plan heads of expenditure on which cuts have been
     imposed shall be allowed during the current fiscal year.
2.2     Seminars and Conferences:

(i)     Utmost economy shall be observed in organizing conferences/
        Seminars/workshops.       Only    such    conferences,    workshops,
        seminars, etc. which are absolutely essential, should be held
        wherein also a 10% cut on budgetary allocations (whether Plan
        or Non-Plan) shall be effected.

(ii)    Holding    of exhibitions/fairs/seminars/conferences       abroad is
        strongly discouraged except in the case of exhibitions for trade

(iii)   There will be a ban on holding of meetings and conferences at
        five star hotels except in case of bilateral/multilateral    official
        engagements to be held at the level of Minister-in-Charge          or
        Administrative     Secretary,    with    foreign    Governments    or
        international    bodies   of which      India   is a Member.      The
        Administrative     Secretaries   are advised to exercise utmost
        discretion in holding such meetings in 5-Star hotels keeping in
        mind the need to observe utmost economy in expenditure.

2.3     Purchase of vehicles:

        Purchase of new vehicles to meet the operational requirement
        of Defence Forces, Central Paramilitary            Forces & security
        related organizations are permitted.       Ban on purchase of other
        vehicles (including staff cars) will continue except against
2.4           Domestic and International Travel:

       (i)    Travel expenditure {both Domestic Travel Expenses (DTE) and
              Foreign Travel Expenses(FTE)} should be regulated so as to
              ensure that each Ministry remains within the allocated budget
              for the same after taking into account the mandatory 10% cut
              under DTE/FTE (Plan as well as Non-Plan).        Re-appropriation!
              augmentation proposals on this account would not be approved.

      (ii)    While officers are entitled to vanous classes of air travel
              depending on seniority, utmost economy would need to be
              observed while exercising the choice keeping the limitations of
              budget in mind.       However, there would be no bookings in
              First Class."

      (iii)   Facility of Video Conferencing may be used effectively. All
              extant instructions    on foreign travel may be scrupulously

      (iv)    In all cases of air travel the lowest air fare tickets available for
              entitled class are to be purchased! procured. No companion free
              ticket on domestic/ international travel is to be availed of.

2.5           Creation of Posts

      (i)     There will be a ban on creation of Plan and Non-Plan posts.

      (ii)    Posts that have remained vacant for more than a year are not to
              be   revived    except    under   very   rare   and    unavoidable
              circumstances   and after seeking clearance of Department of
3.          Observance of discipline in fiscal transfers to States, Public
            Sector Undertakings and Autonomous Bodies at Central/
            State/Local level:

3.1         Release of Grant-in-aid      shall be strictly as per provisions
contained      in   GFRs    and   in   Department    of   Expenditure's   OM
No.7(1)/E.Coord/2012       dated 14.ll.2012.

3.2         Ministries/Departments     shall not transfer funds under any Plan
schemes in relaxation of conditions attached to such transfers (such as
matching funding).

3.3         The State Governments are required to furnish monthly returns
of Plan expenditure - Central, Centrally Sponsored or State Plan - to
respective    Ministries/Departments      along with a report on amounts
ouistanding in their Public Account in respect of Central and Centrally
Sponsored Schemes. This requirement may be scrupulously enforced.

3.4         The Chief Controller of Accounts must ensure compliance with
the above as part ofpre-payment scrutiny.

4.          Balanced Pace of Expenditure:

4.1         As per extant instructions, not more than one-third (33%) of the
Budget Estimates may be spent in the last quarter of the financial year.
Besides, the stipulation that during the month of March the expenditure
should be limited to 15% of the Budget Estimates is reiterated. It may be
emphasized here that the restriction of 33% and 15% expenditure ceiling
is to be enforced both scheme-wise as well as for the Demands for Grant
as a whole, subject to RE ceilings. Ministries/ Departments which are
covered by the Monthly Expenditure Plan (MEP) may ensure that the
MEP is followed strictly.
4.2        It is also considered desirable that in the last month of the year
payments     may be made- only for the goods and services actually
procured and for reimbursement of expenditure already incurred. Hence,
no amount should be released in advance (in the last month) with the
exception of the following:

(i)     Advance payments to contractors under terms of duly executed
        contracts so that Government would not renege on its legal or
        contractual obligations.
(ii)    Any loans or advances to Government servants etc. or private
        individuals as a measure of relief and rehabilitation as per service
        conditions or on compassionate grounds.
(iii)   Any other exceptional case with the approval of the Financial
        Advisor. However, a list of such cases may be sent by the FA to
        the Department of Expenditure by        so"   April of the following
        year for information.

4.3        Rush of expenditure on procurement should be avoided during
the last quarter of the fiscal year and in particular the last month of the
year so as to ensure that all procedures are complied with and there is
no infructuous or wasteful expenditure. FAs are advised to specially
monitor this aspect during their reviews.

5.         No fresh financial commitments       should be made on items
which are not provided for in the budget approved by the Parliament.

6.         These instructions would also be applicable to autonomous
bodies funded by Government of India.
7.         Compliance

           Secretaries of the Ministries / Departments, being the Chief
Accounting Authorities as per Rule 64 of GFR, shall be fully charged
with the responsibility of ensuring compliance of the measures outlined
above.     Financial Advisors shall assist the respective Departments in
securing compliance with these measures and also submit an overall
report to the Minister-in-Charge     and to the Ministry of Finance on a
quarterly basis regarding various actions taken on these measures /

                                                         (Ratan P. Watal)

All Secretaries to the Government of India

Copy to:
1.   Cabinet Secretary
2.   Principal Secretary to the Prime Minister
3.   Secretary, Planning Commission
4.   All the Financial Advisors
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