Abolish distinction between plan, non-plan spends, suggests panel

In a move that may reduce the role of the Planning Commission to merely that of an advisory body, a high-level expert committee on Thursday proposed the distinction between Plan and non-Plan expenditure be abolished for both the Centre and the states.

If the recommendations are accepted, the budgetary Plan allocation, currently decided by the Planning Commission, would be the responsibility of the finance ministry. The panel, however, would have a role in deciding the total budgetary allocation, including non-Plan expenditure, at a conceptual level.

“At the central level, the Planning Commission may be responsible, for the sake of convenience and domain knowledge, for guiding the overall development priorities of the government, the setting of outcome targets and the review of the performance of departments. The ministry of finance may be responsible for guiding the fiscal policy, preparation of the Budget and financial decisions,” said the committee headed by Prime Minister's Economic Advisory Council Chairman C Rangarajan, in its report 'Efficient Management of Public Expenditure'.

Plan expenditure is spent on government programmes and flagship schemes, while non-Plan expenditure includes defence expenditure, subsidies and devolution to states. Currently, the Plan Commission looks at only Plan expenditure, while the finance ministry decides non-Plan expenditure, without reference to the panel.

The committee said the Planning Commission should be responsible for consolidation of the Five-Year Plan over all services, based on inputs from the finance ministry. The finance ministry, on its part, should be made responsible for preparation of the annual Budget, based on inputs of the Commission. The Commission was set in 1950 under the chairmanship of the then Prime Minister, J L Nehru, by a resolution of the Union cabinet.

The panel recommended a shift in budgeting approach from a one-year horizon to a multi-year horizon and from input-based budgeting to outputs and outcomes. It favoured the current classification of revenue and capital expenditure and recommended adjusting the revenue deficit to the extent of grants for creating assets, but only for fiscal responsibility budget management compliance.

“The shift to a holistic view of expenditure would require changes in organisational structure, mandates and processes, as well as appropriate interventions in human resource development and information technology,” Rangarajan said at a press conference. “I do realise doing away with this distinction would mean reorientation of the work of the Planning Commission and the finance ministry. In fact, in a way, this expands the role of the Planning Commission.”

Although the study was commissioned by the Plan panel and its secretary, a member and an advisor were part of the committee. Its Deputy Chairman, Montek Singh Ahluwalia, said the report would now be discussed with the members of the Planning Commission. “The report calls for the removal of a distinction between Plan and non-Plan expenditure, which we will discuss internally, and also with the states,” Ahluwalia said.

Also see: https://www.business-standard.com/india/news/panel-for-reform-in-spending-basics/440971 /