The Expenditure Management Commission (EMC), headed by former Reserve Bank governor Bimal Jalan, is closely studying various government schemes, programmes, acquisitions and projects wherein the government is spending money and will suggest ways to reduce administrative and implementation costs in its interim report.
The commission, which will submit its interim report to the Finance Minister Arun Jaitley after the upcoming winter session of Parliament, will also suggest that the centre should not carry forward pending expenditure in a year to subsequent fiscals in order to show a healthier expenditure or fiscal deficit. "The EMC's brief is not to look at where the taxpayer'smoney is being spent, but how efficiently it is spent," said a senior official who is aware of the EMC's deliberations. "The panel is not looking at the pros and cons of any programme or criticizing the budgetary allocation for any scheme. It is looking at how the sum allocated can be spent in the most costeffective way," the official said. The official said that the EMC is focusing on three aspects, the delivery mechanism of any programme, the technology being used to implement the programme, and see if the accounting methods can be changed. The deliberations are not only regarding plan spending itemslike social schemes and defence acquisitions, but also administrative spending on the non-plan side of things, including how salaries and pensions are being disbursed, and how everything from office space to government to stationary isbeing acquired. The panel has also started to look at if there can bechanges in the government's accounting system. The government follows thecash-based accounting system, wherein income is counted when cash (or a cheque) is actually received, and expenses are counted when actually paid. The alternative method is accrual-based accounting system, wherein transactions are counted when they happen, regardless of when the money is actually received or paid. According to a finance ministry official, a big administrative system like India follows the cash-based accounting system as the accrual-based system would be just too complicated.
Only smaller economies follow the accrual-based system. The official gave the example of New Zealand as agovernment which uses the accrual method. "While an accrual-based system is not ideal for India, the EMC is examining if the government can adapt a system which brings together the best practices of both the methods," the first official quoted above said. He, however, added that the deliberations are in the initial stages and hence couldnot provide further clarity on the matter of accounting changes. The EMC was first announced by Jaitley in his maiden budget speech on July 10. "Time has come to review the allocative and operational efficiencies of Government expenditure to achieve maximum output," he had said then. The EMC was constituted on September 4. Other members of the panel include former finance secretary Sumit Bose, former Reserve Bank deputy governor Subir Gokarn, and senior finance ministry officials. Its terms of reference include reviewing all matters related to central government spending, including suggesting space for increased developmental spending and reviewing the budgeting process and FRBM rules, suggestingways of meeting reasonable proportion of spending on services through user charges, suggesting ways to achieve reduction in financial costs through better cash management system, suggest greater use of IT tools, and suggest improved financial reporting systems in terms of budget and accounting.