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Govt Announces Rs 10,000 Festival Advance, LTC Encashment To Boost Consumer Demand

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Govt Announces Rs 10,000 Festival Advance, LTC Encashment To Boost Consumer Demand
Vishav - 12 October 2020

The government on Monday decided to give Rs 10,000 special festival advance and option to receive cash vouchers in lieu of Leave Travel Concession (LTC) to all its employees as a one-time measure to stimulate demand in the economy.

Finance Minister Nirmala Sitharaman, in a press conference, said the COVID pandemic has adversely affected the economy and that while supply constraints have somewhat eased by different measures announced by the government, consumer demand still needs to be given a boost.

She said in order to do that, the government was presenting proposals that can stimulate demand by front-loading some of the expenditure with some offsetting changes. In terms of consumer spending, she announced two components — LTC Cash Voucher scheme and Special Festival Advance Scheme.

Sitharaman said that the Special Festival Advance Scheme for non-gazetted employees was being revived as a one-time measure, and for gazetted employees too this time.

“All central govt. employees can now get an interest-free advance of Rs 10,000, in the form of a prepaid RuPay Card, to be spent by March 31, 2021. The interest-free advance of Rs 10,000 under the scheme is to be paid back in 10 instalments,” she disclosed.

Festival advance along with other similar advances were abolished on the recommendation of Seventh Pay Commission.

“Under LTC Cash Voucher Scheme, government employees can opt to receive cash to buy items which attract GST of 12 per cent or more. Only digital transactions are allowed and GST invoice would have to be produced to avail this scheme,” the Finance Minister said.

Central government employees get LTC in a block of four years and they also get reimbursement for air or train fare. However, due to COVID-19, employees are not in a position to avail these benefits in the current block of 2018-21, she added.

Those opting for this LTC Cash Voucher Scheme would get full payment on leave encashment and payment of fare in three flat rate slabs depending on class of entitlement, a government official said.

However, an employee opting for this scheme will be required to buy goods or services attracting 12 per cent GST worth three times the fare and one time the leave encashment before March 31, 2021.

Sitharaman said that if Central government employees opt for it, this will cost around Rs 5,675 crore. The employees of public sector companies are also allowed to avail this facility, and for it would cost an additional Rs 1,900 crore.

“The demand infusion in the economy by Central govt and PSUs will be around Rs 19,000 crore. Even if 50% of the states opt to give this facility, we think that this will bring in Rs 9,000 crore,” she added.

The one-time disbursement of Special Festival Advance Scheme is expected to amount to Rs 4,000 crore. If given by all state governments, another Rs 8,000 crores is expected to be disbursed. Employees can spend this on any festival, the Finance Minister explained.

She added that an additional budget of Rs 25,000 crore will be provided for capital expenditure of Centre on roads, defence, infrastructure, water supply, urban development and domestically produced capital equipment.

“We estimate that the measures announced today, for boosting consumer spending and capital expenditure, will boost demand by Rs 73,000 crore, to be spent by March 31, 2021,” she said.

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