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Govt to give cash vouchers to staff in lieu of LTC this year, says Finance Minister Nirmala Sitharaman

Govt to give cash vouchers to staff in lieu of LTC this year, says Finance Minister Nirmala Sitharaman

The Minister has announced a slew of measures to spur spending and stimulate economic demand.

Finance Minister Nirmala Sitharaman unveiled new proposals to stimulate demand in the economy in the wake of the coronavirus pandemic.

Addressing a press conference, Ms. Sitharaman said that she has broadly classified the proposals into two different compartments — consumer spending and capital expenditure.

She said: “There is no gain saying that the pandemic has affected the economy adversely. The needs of the weaker and poor sections have been addressed somewhat in the various packages announced so far. Supply constraints have somewhat eased but consumer demand still needs to be given a bit of a boost. The proposals presented today are defined in such a way — by frontloading some expenditure or advancing some expenditure with some offsetting charges later. The others are directly linked to an increase in the GDP.”

Consumer spending proposals

The Finance Minister said that the consumer spending proposals include a LTC cash vouchers scheme and a special festival advance scheme. The LTC Cash Vouchers scheme is mainly targetted to employees in the government and other organised sectors.

The Minister described the scheme as follows: “Government and many organised sector employees have their jobs and salaries protected and some initial indications suggest savings have increased as many couldn’t spend their usual expenditure during the lockdown.”

She continued: “Central government employees, in a block of four years — between 2017-18 and 2020-21 — employees would have normally availed of one leave travel concession for any destination of their choice plus one visit to their hometown. If they didn’t choose leave travel to one destination of their choice, they would usually go twice to their native village. This would mean air or rail fare as per their pay scale is reimbursed to them.

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Finance Minister introduces LTC Cash Voucher Scheme and Special Festival Advance Scheme makes a one-time comeback

Finance Minister introduces LTC Cash Voucher Scheme and Special Festival Advance Scheme makes a one-time comeback

  • Finance Minister Nirmala Sitharaman introduced two two schemes today to boost consumer spending in the Indian economy — the LTC Cash Voucher Scheme and the Special Festival Advance Scheme.
  • The LTC Cash Voucher Scheme divides the LTC fare component into three flat-rate slabs.
  • The new scheme will let employees use their fare allowance to purchase goods with 12% GST or more.

Finance Minister Nirmala Sitharaman is introducing new proposals to ‘stimulate demand in the economy’. According to her, the government’s previous policies addressed the needs of the poor. This time, the proposals are divided into two categories — consumer spending and capital expenditure.

“Supply constraints have somewhat eased, but consumer demand still needs to be given a bit of a boost,” she said.

Within consumer spending, there are two components — LTC Cash Voucher Scheme and the Special Festival Advance Scheme.

The Special Festival Advance Scheme was a part and parcel of government employees pay package up until the 6th Pay Commission. It’s introduction this year is a one-time come back to boost spending.

Impact of LTC Cash Voucher scheme:
Cost to central government ₹5,675 core
Cost to PSBs and PSUs ₹1,900 crore
Expected demand infusion by central government employees ₹19,000 crore
Expected demand infusion by state government employees ₹9,000 crore
Total expected addition consumer demand generation ₹28,000

“Our estimates are on the conservative side. We expect actual spend to be higher,” said Union Minister Tarun Bajaj.

LTC Cash Voucher SchemeThe new LTC Cash Voucher Scheme divides the LTC fare component into three flat-rate slabs depending on the class on entitlement. Any fare payment will continue to be tax free.

According to Sitharaman, savings have increased due to lockdown especially. “We would like to incentivise them to contribute to the revival of demand for the benefit of the less

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