Centre to give cash vouchers to staff instead of LTC this year to boost spending

The Centre on Monday announced steps to boost consumer spending in the Covid-hit economy, which included a one-time Rs 10,000 interest-free festival advance to all its officers and employees against their own salary, and cash vouchers in lieu of leave travel concession (LTC) to be spent on goods and services.

Finance Minister Nirmala Sitharaman said the initiatives will give an estimated Rs 73,000-crore boost to demand, which has been adversely affected by the pandemic. "If the private sector spending through LTC tax benefit is added to the kitty, it will amount to a demand boost of another Rs 28,000 crore, taking the total to Rs 1 lakh crore," she said.

“There are indications that the savings of government and organised sector employees have increased. We want to incentivise such people to boost demand for the benefit of the less fortunate,” Sitharaman told the press, as she also unveiled Rs 12,000 crore interest-free 50-year loan to states and an additional budget of Rs 25,000 crore as capital expenditure to develop roads, water supply and defence that is aimed setting right India’s creaking infrastructure and provide jobs alongside.

This is over and above the Rs 4.13 lakh crore capital expenditure announced in the Budget for 2020-21.

Sitharaman assured that the measures announced will neither burden the common man nor raise government debt. “Today’s solution must not cause tomorrow’s problem,” she said.

Under the LTC cash voucher scheme, government employees can opt to receive cash amounting to leave encashment plus three times the ticket fare, to buy items which attract a GST of 12%.

Experts, however, said not many employees would avail the schemes as they came with too many conditions. “Increase in consumer expenditure will depend upon how many employees avail the scheme given that conditions are being imposed,” said Care Ratings.

There are around 3.5 million central government employees who would be entitled to the benefits.