Government Seeks Parliament Nod for Rs 25,500 Crore Additional Spending

New Delhi:  The government has sought Parliament’s nod to spend an additional Rs 25,500 crore in the current fiscal, nearly half of which will be spent on capital infusion into state-owned banks to help them overcome the high bad loans situation.

Finance Minister Arun Jaitley, in the first supplementary demands for grant presented in Parliament, sought approval for gross spending of Rs 40,821.88 crore. Net cash expenditure would however be lower at Rs 25,495.24 crore after accounting for savings or enhanced receipts/recoveries of Rs 15,325.62 crore. This spending would be on top of Rs 17.77 lakh crore expenditure provided in the annual Union Budget for 2015-16.

The ministry plans to infuse Rs 12,110 crore as capital in state-owned banks struggling with highest levels of bad debts in 13 years. This is on top of Rs 7,940 crore provided by Mr Jaitley in the Budget for 2015-16.

“Bank recapitalisation plan is comprehensive. We have put in four years plan to push growth and tackle NPA,” he said.

The allocations compare to Rs 6,990 crore of 2014-15, the lowest total since at least 2009.

“Rs 20,000 crore (capital infusion) would happen as early as possible. It can happen by September after we get approval from Parliament,” Financial Services Secretary Hasmukh Adhia told reporters.

The Finance Ministry in a statement said public sector banks (PSBs) as of now are “adequately capitalized” but would need Rs 1,80,000 crore extra capital over the next four years (up to FY 2019). Of this, the government plans to provide Rs 70,000 crore through budgetary support – Rs 25,000 crore each in current and next fiscal and Rs 10,000 crore each in 2017-18 and 2018-19.

Banks would be required to raise the remaining amount from the market, the statement said.

Besides, the government has sought Parliament’s nod for injecting Rs 800 crore as equity in state-owned Air India and an additional Rs 4,000 crore towards Integrated Child Development Scheme and other programmes of the Ministry of Women and child development.

The Finance Ministry has also sought a token Rs 100 crore for establishment of MUDRA Bank, according to the supplementary demands for grants tabled in Parliament.

An additional Rs 2,685 crore has been sought for Prime Minister Narendra Modi’s pet project Swachh Bharat Mission and other schemes of Ministry of Drinking Water and Sanitation.

An allocation of Rs 1,153 crore has been sought for buying crude oil to fill the nation’s maiden strategic crude oil reserve built at Visakhapatnam by Indian Strategic Petroleum Reserves Ltd (ISPRL).

Another Rs 1,000 crore has been sought for development of Chennai and Bangalore Metro Projects and Rs 400 crore for clearing the pending subsidy claims towards import of edible oil, sugar mills and interest subvention.

As regards capital infusion in PSU banks, of the total amount of Rs 20,000 crore, Rs 10,000 crore would be provided to weak state-owned banks.

Adhia further said that third tranche of capital infusion will come in the last quarter of current fiscal which will be given to banks which will show improvement in their performance in the nine month period.