Bihar caps fund release for state schemes at 75% of outlay this fiscal

The Bihar government has issued a directive to all its treasuries to put a ceiling of 75% on release of funds against budget outlay under state schemes for the last four months of the current fiscal, ostensibly to ensure funds are spent judiciously and not parked ahead of the closure of the books of accounts in March 2023, according to a circular issued by the finance department recently.

However, officials in the department, who were not willing to be identified, said the decision cap the fund release for the last four months, when infra projects and earth works gain momentum, indicates that the state is facing shortfall in resources.

“It is apparent that there is a shortfall of revenue to meet full budget outlay against state schemes. The remaining tranche of budget outlay from treasuries would be allowed in coming months, depending on the revenue flow,” said an official, seeking anonymity.

State government treasuries and departments follow 33: 32:35 ratio for three quarters, of four months each, for expenditure and release of funds against budget outlay under two heads, annual schemes (plan) and committed expenditure (non-plan).

According to the circular of the finance department, issued on November 30, while treasuries should clear bills of expenses made under committed expenditure (salaries, pension, interest payment, grants to universities,DA, increment ,etc) up to 35% for the last quarter (100% for this fiscal), it should be capped at 75% overall for state schemes — which means only ₹10 for every ₹35 for the last four months would be released.

Bihar’s total budget outlay for the current fiscal is ₹2.49 lakh crore, as per revised estimates.

Officials said while there has been a rise in the committed expenditure over the last few years, the state government this year is also facing an additional pinch because of discontinuation of the GST compensation to states. The Centre had given GST compensation to states for last five years, beginning 2017. In last fiscal (2021-22), Bihar had received about ₹8,000 crore in GST compensation.

The committed expenditure of state government this fiscal is above ₹1.50 lakh crore and expected to rise more in view of increase in salary bills due to fresh appointments, officials said.

“The committed expenditure has risen by 10-12% in the last few years. Once the number of appointments goes up, it is going to increase more,” said another official in the finance department.

Bihar’s revenue resources are limited and the state government depends heavily on central devolutions, even as the state also has the pressure of keeping fiscal deficit within limits of 3.5% of the GSDP (gross state domestic product) as fixed by the union government under FRBM (fiscal responsibility budget management) Act.

According to data, the state government, by end of November 2022, has received ₹55,000 crore as against the estimated ₹91,000 crore in central devolutions while its own tax revenue (from registration, transport, commercial taxes) is said to be about ₹25,000 crore so far as against the target of ₹41,000 crore for this fiscal.

The state’s non-tax revenue (mining, royalty, sand) is targeted at ₹6,100 crore for this fiscal.

“The picture of the state’s own revenue is going to be clear in February. But we are expecting there would be less shortfall,” said an official. “We are hoping that central devolutions this year would be higher than targeted because of rise in volume of central taxes. It will fund state schemes.”

Meanwhile, additional chief secretary (finance) S Siddharth said there was no shortfall of funds as such and the remaining tranche of funds would be released from February 1.