Centre announces travel payout, festival advance for government employees
To aid the economy, bruised by the coronavirus pandemic, the Centre on Monday announced a few measures for government employees. One of the steps pertains to Leave Travel Concession (LTC) and another to festival advance, which was abolished after the Seventh Pay Commission. Announcing the measures, Finance Minister Nirmala Sitharaman said consumer spending and capital expenditure have been focused upon. Here's more.
LTC cash scheme will help employees buy goods
Government employees get Leave Travel Concession (LTC) every four years — to travel within India to a destination of their choice, and one trip to their hometowns, or two to their hometowns. Under this new scheme, employees will get an equivalent amount despite not traveling. They will have to spend the money on goods/services worth three times the fare, and amounting to leave encashment.
Payment has to be done digitally, GST invoice mandatory
However, Sitharaman underlined that employees can only purchase items having a minimum of 12% GST. They will have to spend the money only through digital means that too before March 31, 2021. "Fare payment will be tax-free and leave encashment will be taxed at the usual rate," Sitharaman explained. This step was taken as coronavirus-necessitated restrictions have played spoilsport to travel plans.
The benefits will cost government over Rs. 5,000 crore
"If the central government opts for it, it will cost around Rs. 5,675 crore. Employees of PSBs and PSUs will also be allowed to avail the facility and the cost for them will be Rs. 1,900 crore," revealed Sitharaman.
Special Festival Advance of Rs. 10,000 was also announced
In yet another step, the Special Festival Advance Scheme for government employees was restored as a one-time affair. Under this scheme, employees can receive an interest-free advance of Rs. 10,000. The advance, in the form of a prepaid RuPay Card, will be recovered in ten installments. Sitharaman said the Centre will bear the banking costs linked with this scheme.
Employees can't withdraw cash, but spend anywhere they want
Sitharaman stressed that government employees, both gazetted and non-gazetted, won't be able to withdraw money through this pre-loaded card but can spend it anywhere they wish to before March 31, 2021. "The special festival advance scheme will lead to additional consumer demand to the tune of Rs. 8,000 crore," she added. She claimed nearly Rs. 4,000 crore could be disbursed under this scheme.
Centre looking to issue interest-free loan for 50 years
Subsequently, moving toward capital expenditure, Sitharaman said, "We will issue an interest-free 50-year loan to the states for capex worth Rs. 12,000 crore." Out of the aforementioned amount, Rs. 1,600 crore was set aside for Northeastern states, Rs. 900 crore for Uttarakhand and Himachal Pradesh, and Rs. 7,500 crore was assigned for the remaining states. The rest Rs. 2,000 crore came with riders.
States can spend money to settle dues: Sitharaman
States that will successfully abide by at least three out of four reforms ofAatmaNirbhar Bharat fiscal deficit package will be eligible for the rest of Rs. 2,000 crore. This money can be used for new, underway capital projects, or settle bills, but has to be utilized before March 31, 2021. "This fund will be over and above all other additional borrowing ceilings," she said.
An additional capital expenditure of Rs. 25,000 crore was announced
"Rs. 25,000 crore additional budget to be provided toward capital expenditure on roads, defense infrastructure, and domestically produced capital equipment, water supply, urban development. This will be above provisions of Rs. 4.13 trillion made in the Union Budget," she added.
Sitharaman assured today's solutions won't cause tomorrow's problems
Toward the end of the press meet, Sitharaman said the government expects a Rs. 73,000 crore boost to demand with these measures. "If the private sector also looks at a similar LTC tax benefit scheme then equal spending of Rs. 28,000 crore can happen. Total additional demand estimated to exceed Rs. 1 trillion," she added, assuring that the steps won't burden the common citizens.
