The new cash package for central employees in lieu of LTC- a novel idea to boost market demand...
The Central Government has recently come up with a novel idea for its employees named “ Special cash package equivalent in lieu of Leave Travel Concession Fare for Central Government Employees during the Block 2018-21“ in order to provide a boost to the sagging economy especially during the coming festive season.
The global pandemic, declared in March this year in the wake of COVID-19 caused by Corona virus, has taken severe toll on world economies including India. In India the Central government declared lockdowns, States declared curfews and other prohibitory measures in order to face the greatest challenge the country has faced since independence. As a result of lockdown the entire nation came to a screeching halt. Essential services somehow managed to function and provided bare necessities to the citizens. Arguably, the nation, which despite having seen many adversities in past, was not prepared this time as the enemy was too tiny and could barely be visible. The lockdown during the first quarter of this Fiscal was needed which provided the governments, Central or State, precious time to ponder and take measures to tackle the menace. As a result the country which hardly manufactured Personal Protection Equipments ( PPE kits) started manufacturing the same alongwith other health related substances like alcohol based sanitizers , gloves, Ultraviolet ( C) sterilisation boxes, medical grade oxygen, Pulse Oxymeters, fever guns, BiPAP ventilators and many such allied products, on a priority basis.
During the lockdown period the Central government reviewed the economic situation with surgical eyes. A country with 130 crore could not have been kept locked for eternity, the central thought. The Hon’ble Prime Minister, under whose stewardship the fight against the pandemic began, declared “Jaan bhi-Jahan bhi” indicating the need for unlock. Thus the Unlock 1.0 was declared on 8th June in order to slowly bring back the normalcy in a staggered manner. But a severe setback to economy had already happened. Millions of workers left cities and headed towards villages. Consequently, the Industrial Production Index ( IIP) has dipped, the exports have slipped, the petroleum industry has suffered due to sudden drop in demand and the unorganised sector has seen near destruction financially. These effectively has led to severe drop in GDP which is considered the main cursor in determining economic health. The government revenue collection, both direct and indirect, hit trough during the first quarter destabilising the fiscal plan.
In order to provide a fillip to the economy the Central government has brought this novel idea of new cash benefit package in lieu of the LTC otherwise available to central staff. An OM dated 12th October clarified that the cash package benefits will be available if an employee spends three times the admissible fare amount plus the cash equivalent of 10 day’s pay. It is well known that spending even in non-core sector boosts the economy. According to estimates the new cash package may infuse Rs one lakh crore in the market. The employees may take benefit of the one time scheme and purchase goods or procure services which attract GST @12% or more. The scheme cedes on 31st of March 2021. For the details the readers may refer to the OM dated 12th October 2020. Besides, the government has also announced a Festival Advance of Rs 10000/- for all employees. These packages are expected to provide the required stimulus in the market by enhancing demand.
However, on a flip side apprehension is expressed in some quarters as to the effectiveness of the scheme. At a time when the entire nation is under extensive stress on account of job loss and related psychological issues extending the benefits to only government employees is seen as a myopic one. Also, the tax exemption issues on the salary component (10 days) need to be resolved before the end of current fiscal, the experts argue. Also it is analysed that the freezing of DA for the employees and DR to pensioners ( from 1.1.2020 onwards) have left very less in the pockets of employees.In such light how much an employee can spend in buying consumer goods in order to assure himself the benefits of the LTC scheme is a matter of sheer speculation. Another factor that may weigh against the scheme is the inherent fear of Covid-19 for which the employees are saving as much as they can as treatment in private hospitals is quite expensive.
All said and done the government is upbeat that the cash package in lieu of LTC is going to induce cheer at last in the consumer market which is demand elastic. It is everyone’s duty to contribute in achieving the desired goal set by the government. As for the government it has done its own bit.
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ReplyDeleteVery precise and accurate write-up. The purpose of the Govt is good but it all depends on how and what response the scheme gets from all those concerned. The magnitude of cash flow which would be induced in the economy appears to have been computed based on the statistical data of entire central Govt employees, their entitlement to LTC, leave encashment etc. The scheme would be a great success if large section of employees or even if 50% of them avail this scheme. But, at the same time, if employees show reluctance to avail the scheme (mainly on reasons of spending 3 times of LTC entitlement + leave encashment), the projected infusion in the economy will have a serious impact. Even in the pre-pandemic (lockdown) period, very less number of employees used to avail LTC benefit, as the costs incurred on food and lodging etc during LTC tour were to be borne entirely by the employees and were not a part of reimbursement. The same trend may be seen in this latest LTC cash package scheme too. Let's, hope for the better.
It's a great analysis Mr Manohar. In fact it seems that the scheme would be more successful had the compulsion of 3 times spending was not there.
DeleteAnalysed to the point.
DeleteSuccess will depend on number of employees taking benefit of the scheme. Spending requirement of three times the fare may be a road block. Thanks for such logical analysis.
Yes Sir... It's a good initiative by the Govt. to boost our economy... On the other hand,
ReplyDeleteofficers who already have a plan to purchase any items/goods in nearby future ... can avail this scheme..(Of course goods attracting GST @ 12% or more)
Sir,
ReplyDeleteIt's good initiative by Government. But I think defreezing of DA from Jan 21 could have been better option.
Sir,
ReplyDeleteIt's good initiative by Government. But I think defreezing of DA from Jan 21 could have been better option.