Deputy Chairman Montek Singh Ahluwalia responds to questions on a debate over the role and future of the Planning Commission
There is debate on the role of the Planning Commission, including a suggestion that the Commission be wound up. How would you see it?
There are several things the Commission does. You can abolish the Commission if you don't think any of these tasks is necessary. Otherwise, if you abolish this body, you would have to assign these tasks to some other body.
What does the Commission do?
First, it allocates Plan resources in the Central Budget between the Centre and the states, and among the Central ministries. It negotiates with the finance ministry how much resources should be provided to meet development goals. Demands always exceed availability and we end up pushing for a higher number and the finance ministry for a lower one. The prime minister typically makes the final call.
We are also responsible for appraising programmes at the start of each Plan period. The appraisal is cleared by an inter-ministerial committee and each programme is then approved by the Cabinet. Someone has to perform the role of appraisal; in our system, it is the Planning Commission
We also evaluate policy in each sector, and make suggestions. The Commission sets broad targets for the economy and outlines the policies needed to achieve the targets. Policy here means not just Plan programmes, but broader government policies that affect outcomes even in a market economy. Each of these policies is in the realm of one ministry or the other, but you can't expect an independent assessment from the ministry implementing the policy. The Commission provides the government with an independent view. We also assess policies in individual states and give feedback to both the Centre and the states.
Finally, the Commission helps coordinate policies in related areas handled by different ministries. For instance, take energy, which is handled by seven ministries. The price policy for one energy source must be guided by principles broadly consistent with those guiding price policy for other energy sources. We presented an integrated energy policy to Cabinet, which approved it in 2010. We are in the process of implementing it. It is slower than we would have liked but there has been progress. Some people think the coordination problem can be solved by having a single energy minister. I doubt if such a super ministry is politically possible but even if it were, leaving the policy entirely to the ministry would deprive the government of an independent assessment.
Similar issues arise in transport, where we need a holistic view of policy affecting different transport modes. Or, take PPP (public-private partnership) for infrastructure. We have been actively involved in developing common procedures for different sectors, and model concession agreements that are different for different sectors but have common features.
What about your role vis-à-vis the states?
We not only discuss with chief ministers once a year, but also every year at the National Development Council, where all states express their views. On many occasions, we have picked up issues raised by the states and pushed their case with the Centre. The smaller states in particular feel this is a very important role. But even many of the larger ones have interacted with us in new areas such as PPP.
Can you give some examples?
Mineral-bearing states have long argued that the calculation of royalty should be on an ad valorem basis. We pushed for this and succeeded. We have also consistently pushed for greater flexibility in environmental matters relating to highly-forested hill states, which should not be subjected to the same restriction as states that have denuded their forest cover. Most recently, we have successfully pushed for greater flexibility in centrally sponsored schemes, which all states want. Several states have sought our help with designing PPP projects.
Arvind Panagariya says the centrally sponsored schemes (CSS) in the realm of the states should be abolished and the money transferred to the state governments en bloc, with no guidelines. He has also said you wouldn't need the Planning Commission if this were done.
Centrally sponsored schemes are not the only plan programmes. There is also the central sector's spending on national highways, railways, major ports, atomic energy, and all the science departments. Even if CSS is abolished, Panagariya's desire to see the end of the Planning Commission might not be achieved, unless he wants to abolish all central sector investment completely.
But should CSS be abolished?
Most states would prefer that CSS be converted into bloc grants to the states, leaving it to them to decide where they want to put their money. However, the Centre, members of Parliament and other stakeholders, including civil society, don't take this view. Incidentally, individual departments in the states privately tell us that if money given for, say, health were made part of a general transfer, the money could go to other schemes.
The CSS were evolved precisely to incentivise the states to spend more in critical areas. However, I agree the system had become too cumbersome, with "one size fits all" guidelines and micro-managing by the ministries concerned. But, as I have said, we have taken the lead in reforming the system by reducing the number of schemes and introducing flexibility in the guidelines. We could do more and we could reduce the schemes further.
Panagariya says transfers to states for specific purposes could just as well be done by the Finance Commission and also monitored by it. For this reason, the Finance Commission should be made permanent.
The Finance Commission has mainly finance people on it because they focus on total resource requirements of states and the states' tax-raising capacity. To monitor sector-specific expenditures, its members will need much wider sector expertise. They would also have to interact extensively with the central ministries that have sector responsibility. This would make it very like the Planning Commission.
A lot of government money is poorly spent. What is your response?
Government programmes can achieve their objectives only if well designed and properly implemented. This requires constant monitoring of the effectiveness of programmes and a willingness to redesign when necessary. The solutions are not always obvious. For example, if you want to stop leakage and corruption, you can set up elaborate monitoring and oversight mechanisms. But this objective might be better achieved by a system change, such as relying on Aadhaar or cash transfers in some cases.
What sort of changes do you think are needed to make the Commission more effective?
There are several but let me just mention some. First, we need to become a vehicle for bringing the best technical inputs into policy making. Unlike in the past, there is a great deal of expertise outside the government, and we need to bring this in to shape policy. We have had some success, especially at the younger level but it is not enough. Second, instead of being organised as "shadow" ministries, with a unit in the Commission corresponding to each ministry, we need a more collaborative process across sectors, with members working together with each other on specific problems, most of which require inter-ministerial cooperation. We have done this in certain cases and it has worked well. We also need to do more long-term analytical work: Not just Five-Year Plans but 20-year plans. That is not easy. If the Commission had done a 20-year plan in 1995 for 2015, it would have completely missed the role of information technology. Remember, the internet as we know it, with access via browsers, only began in 1993!
Is it true that some chief ministers like Narendra Modi have considered their annual Plan discussions with the Planning Commission a waste of time?
No one has actually said so but many do feel that since their expectations for additional resources are often not met, they are disappointed. But the annual Plan discussions are not meant to negotiate resources - we have tried to move away from that by being formula-driven. There is a mistaken notion that we approve the details of state Plans. Actually, approval is technically necessary to release the normal central assistance, which is a block grant but this approval is given on the basis of the annual Plan discussion with the chief minister. Earlier, there are official-level meetings; if state officials agree to some restructuring in these, it is done by them. It is not forced on them. The Planning Commission also tries to help by hearing what they are saying and then making their case with other central ministries. The flexibility given for CSS is one example. I also think it is not a bad idea for the chief ministers to hear some frank but respectful criticism of their policies from members. Most of them take it well and also offer a spirited defence.
As constituted at present, the Commission has the same generalists as the ministries and is not really able to offer specialist advice. Would you agree?
This is a very genuine problem. We definitely need to be able to bring in specialists when we want for short periods, possibly as consultants. For this, we need more generous consultancy packages. We have improved terms for consultants over what those were earlier but I think much more needs to be done. Ideally, we should even be able to get international consultants on some issues.