Sitharaman PC Highlights: FM announces LTC cash voucher scheme, leave encashment, festival advance for govt staff to boost demand

Union Finance Minister Nirmala Sitharaman on Monday announced a slew of measures to stimulate the demand in the economy. The Finance Minister's address was held ahead of the GST Council meeting, which is scheduled from 4-6 pm.

Eco Affairs Secy: Have assumed that only 50 percent of the states will give the same benefits on the LTC scheme. Estimates also assume that private-sector impact (on LTC Scheme) is the same as the Central and State govt impact.

Eco Affairs Secy: Estimates made on a very conservative basis. Only 1/4th of employees will be claiming the benefit. We will be very happy if more employees claim the benefit.

We would request the private sector to consider similar measures to help another Rs 28,000 cr demand, says FM Nirmala Sitharaman

Total boost to demand estimated at Rs 73,000 cr by schemes announced today, says FM Nirmala Sitharaman.

Govt announces Rs 10,000 interest-free festival advance to employees | The government on Monday announced a one-time Rs 10,000 interest-free festival advance to all its officers and employees as part of plans to increase consumer spending to spur demand in the economy. At a press conference, Finance Minister Nirmala Sitharaman said the festival advance was discontinued from the 6th Pay Commission for central government employees. But as a one-time measure, an interest-free advance will be given to all officers and employees of the central government, she said. This Rs 10,000 advance will come as a pre-paid Rupay card, which can be availed and spent by March 31, 2021. The repayment will be in 10 installments, she said adding that Rs 4,000 crore is likely to be spent on this.

Govt to give Rs 12,000 cr interest-free 50-year loan to states for capital projects | Finance Minister Nirmala Sitharman on Monday announced a Rs 12,000 crore interest-free 50-year loan to states for spending on capital projects in a bid to boost the economy. Addressing a press conference, she said, out of the Rs 12,000 crore, Rs 1,600 crore will be given to north-eastern states and Rs 900 crore will be for Uttrakhand and Himachal Pradesh.

She said Rs 7,500 crore will be for the remaining states. Rs 2,000 crore will be given to states that fulfill pre-stated reforms. The loan will have to be spent entirely on new or ongoing capital projects, she said adding that states can settle bills of contractors and suppliers but all the amount has to be paid before March 31, 2021. The loan is over and above borrowing ceilings of the states and the repayment will be one bullet payment after 50 years, she added. The Finance Minister also announced an additional capital expenditure of Rs 25,000 crore by the central government. This will be in addition to Rs 4.13 lakh crore budgeted, she said, adding that the additional money will be for spending on roads, defence infrastructure, water supply and urban development.

Govt to give cash vouchers to staff in lieu of LTC this year: FM | In a bid to stimulate demand in the economy, the government on Monday announced giving out cash vouchers to central government employees this year in lieu of leave travel concession (LTC) fare which could be spent only on buying non-food GST-rated items. Finance Minister Nirmala Sitharaman said the employees could buy items that attract 12 percent or more goods and services tax (GST). These purchases will have to be made in digital mode from GST-registered outlets. Every four years, central government employees get LTC to any destination to their choice plus one to their hometown. Since travel is difficult to undertake during the pandemic, the government will pay the entitled fare as cash vouchers which have to be spent by March 31, 2021, she said. Central government payout on cash-in-lieu-for-LTC will be Rs 5,675 crore, and another Rs 1,900 crore will be payout by central PSUs and public sector banks, Sitharaman said. The demand infusion because of this would be Rs 19,000 crore, and another Rs 9,000 crore if half of the states follow this guideline, she added.

This funding will be over and above all other additional borrowing ceilings given to states: FM

We want to now give a new thrust to states, Centre CAPEX. Capital expenditure has a high multiplier effect: FM; Issuing an interest-free 50-year loan amounting to Rs 12,000 cr to states for capital expenditure, says FM.

For central govt employees, around Rs 4,000 cr will be given. If states replicate, it will be about Rs 8,000 cr. We estimate, at least Rs 8,000 cr of additional demand boost: FM

We are reviving the special festival advance scheme. Rs 10,000 interest-free advance to be repaid in 10 installments and it’s available up to March 31, 2021. This will be given as a pre-paid RuPay card, says FM

Proposed to restore the Festival Advance as a one-time affair for govt employees: FM

LTC cash voucher scheme to enable govt employees to claim cash instead of reimbursement for travel. LTC cash can be used to buy goods, services worth 3 times fare, 1 time leave encashment before March 31, 2021. Fare payment to be tax-free, leave encashment to be taxed at the usual rate, says FM Sitharaman.

FM announces the LTC cash voucher scheme to boost consumer spending; says Govt employees need to be incentivised to contribute to the revival of demand for the benefit of the less fortunate. Govt employees can opt to buy goods/services worth 3 times the fare and 1 time the leave encashment; To be eligible for the scheme, goods and services will have to be bought before March 2021. And, it has to be done only through digital modes, not cash; Spend needs to be done on items attracting GST of 12 percent and more.

Consumer spending related proposal has two components—the LTC Cash Voucher scheme and Special Festival Advance Scheme, says Finance Minister Nirmala Sitharaman.

FM: COVID-19 pandemic has adversely affected the economy. The needs of the poor and the weaker sections have been addressed in the Atma Nirbhar Bharat package and its extensions. Supply constraints have eased now, but consumer demand is still affected.

FM: The proposals to stimulate demand are designed to stimulate demand in a fiscally prudent way. Some of them involve advancing of expenditure, with offsetting changes later, others are directly linked to increasing GDP, says Sitharaman.

FM: The pandemic has adversely affected the economy. The needs of the poor and weaker sections addressed in various announcements by the govt. Supply constraints have somewhat eased but consumer demand still needs to be given a boost.

FM: No gainsaying that pandemic has adversely impacted the economy. Consumer spend needs to be given a boost, says the FM.

FM Sitharaman begins her address to the media; says we have some proposals to stimulate demand in the economy. Broadly, the proposals fall under two heads—consumer demand and capital expenditure.

The GST Council in its meeting on Monday is likely to discuss the suggestion of non-BJP ruled states of setting up a ministerial panel to develop consensus on the issue of compensation, sources said. The Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising of state finance ministers, will for the third time in a row discuss the issue of funding the shortfall of Goods and Services Tax (GST) revenue of states.

While some opposition ruled states are demanding that a Group of Ministers be set up to arrive at a decision on the mechanism for funding compensation shortfall, BJP ruled states, which have already opted for the borrowing option given by the Centre, are of the view that they should be given a go-ahead so that they can get money quickly. The single agenda 43rd meeting of the Council will discuss on the way forward, sources said.

In its previous meeting last week, the Council had decided to extend the surcharge on taxes on luxury goods such as cars and tobacco products beyond June 2022 but failed to reach a consensus on ways to compensate states for loss of tax revenue. The projected total compensation shortfall in the current fiscal stands at Rs 2.35 lakh crore.