Govt saved ~10,000 cr in interest costs in FY22, says Somanathan

“ON SINGLE NODAL AGENCY, WE HAVE AN UNSPENT BALANCE OF ~1.2 TRILLION. SO THAT IS A QUANTUM WE WON’T HAVE TO RELEASE OR BORROW TILL IT IS SPENT” T V SOMANATHAN

Finance secretary

Union Finance Secretary T V Somanathan on Tuesday said the Centre had saved ~10,000 crore in FY22 on interest payments after adopting new accounting mechanisms for central government agencies and centrally sponsored schemes (CSS) for state governments.

Speaking at an event, Somanathan said due to these, there was an unspent balance of ~1.2 trillion with state agencies from CSS as on March 31, 2022.

This means this amount will be reduced from the Centre’s borrowing for now and it can be considered a short-term saving for the exchequer.

The new accounting mechanisms in the Public Finance Management System are the Treasury Single Account (TSA) for central government agencies and autonomous bodies, and the Single Nodal Agency (SNA) for distributing CSS funds to states.

“We saved ~10,000 crore on interest payments in FY22 due to the TSA and SNA. On the SNA we have an unspent balance of ~1.2 lakh crore. So that is a quantum we won’t have to release or borrow till it is spent,” Somanathan said.

The finance secretary was speaking on the sidelines of the launch of the SNA dashboard by Union Finance Minister Nirmala Sitharaman.

He said such measures would help the Centre’s fiscal deficit in a year as tough as FY23.

India’s fertiliser subsidy bill for FY23 could rise to around ~2.5 trillion against the Budget estimate of ~1.05 trillion.

The impact of the latest round of excise duty cuts on petrol and diesel will be around ~85,000 crore for the year, while the recent import duty cuts on other items will lead to a revenue loss of ~10,000-15,000 crore.

Additionally, the decision to provide a subsidy of ~200 per gas cylinder (up to 12 cylinders) to over 90 million beneficiaries of the Pradhan Mantri Ujjwala Yojana will lead to ~6,100 crore a year forgone.

Apart from the ~1.10-trillion increase in fertiliser subsidies already announced, the Modi government’s decision to extend the PM Garib Kalyan Anna Yojana (PMGKAY) till September will increase the food subsidy outlay for FY23 to ~2.87 trillion from the Budget Estimate of ~2.07 trillion.

Speaking at the event, Sitharaman said the SNA dashboard, which ensures tracking fund transfers to states and their utilisation, would make governance more transparent and realise better value for every rupee sent by the Centre.

The dashboard will provide a platform for ministries/departments to monitor their transfers to states and utilisation by the implementing agencies, and assist in cash management by the government.

“About ~4.42 trillion goes through the CSS and this is not a small amount. Today you are in a position to track that money. It is a huge success in making governance transparent. That quantum of money is also equally sent just in time. What better value realisation for every rupee sent!” Sitharaman said.

Speaking at the event, Somanathan said this system would help cut interest expenditure because money would be released at the stage where it was needed.

“If the money is stuck somewhere, we would like to minimise what is stuck and hold it where it is more efficiently held. The Centre would like to pay as interest as little as possible of public money and that is not a trivial cost. That helps us a lot, particularly in a difficult year like the current financial year. These are extremely helpful in containing the fiscal deficit within what is possible,” Somanathan said.