1. ‘Merge schemes, abolish plan and non-plan expenditure’

‘Merge schemes, abolish plan and non-plan expenditure’

n Expenditure Reforms Commission bats for DBT to cover all subsidies...

Mumbai | Updated: January 14, 2015 2:19 PM

Rationalisation and merger of the plethora of Centrally-sponsored schemes, extension of the Direct Benefit Transfer (DBT) scheme to cover almost all government subsidies and welfare payments, using the Post Office as a payments bank to facilitate such transfers, and eliminating the distinction between plan and non-plan expenditures are among the recommendations of the Expenditure Management Commission headed by former RBI Governor, Bimal Jalan.

The Commission, which is set to submit its interim report to the finance ministry this week, is understood to have made expenditure reform and rationalisation, rather than reduction, the focus of its exercise.

“The idea is to maximise outcomes from every rupee spent by the government through more effective monitoring and targeting. Any expenditure reductions resulting from it would only be an incidental by-product,” an official with direct knowledge of the recommendations of the Commission told The Indian Express.

The Commission appointed after the Modi-led NDA government’s first Budget has a mandate to suggest expenditure reforms which would lead to an overhaul of India’s subsidy regime and in turn, a lower fiscal deficit.

Central to this is the weeding out or merger of the large number of schemes — either Centrally sponsored or jointly run with the states — with small outlays and retaining only a handful of flagship programmes. The states may not mind this at all, as they have themselves been demanding the abolition of most Centrally sponsored schemes and transfer of the monies to them as part of normal Central assistance.

But even with regard to the Central schemes that would remain, the stress would be on targeting the beneficiaries better. The Commission is said to have strongly batted for using the DBT route in combination with the Aadhaar unique identification numbers for authentication of the intended beneficiaries.

This process would be further enabled with India Post being given a payments bank licence by the RBI, based on its recently released guidelines for such financial institutions specialising in providing small savings accounts and remittance / cash withdrawal facilities.

India Post’s vast network of 1.55 lakh offices — covering one in every 6,100 persons in rural areas and one in every 25,500 in urban areas — would make it the ideal vehicle for the DBT scheme, the official added.

The other significant proposal made by the Commission is doing away with the distinction between plan and non-plan expenditures. This, the official pointed out, is logical given that the government has disbanded the Planning Commission and replaced it with the NITI Aayog whose main remit is in providing technical and strategic advice to the Centre and the states.The Commission’s recommendations will be a key input for the finance ministry for the upcoming Budget.

The final report will be submitted to the government by end December this year, in time for Budget 2016-17.

Henceforth, the distinction would be merely between revenue and capital expenditures. While the latter refers to spending, which leads to the creation of assets yielding financial or social returns, the former include salaries, interest payments and other such recurrent spending.

Abolition the distinction between plan and non-plan expenditure has, in fact, been advocated by other panels too, including one led by C Rangarajan, chairman of the previous Prime Minister’s Economic Advisory Council.

Besides Jalan, the Commission includes former finance secretary Sumit Bose and former RBI deputy governor Subir Gokarn.

RECOMMENDATIONS

* Retain only handful of flagship programmes with small outlays
* Better targeting, authentication through Aadhaar number
* Use the vast post office network to deliver subsidies through the direct benefits transfer scheme
* Instead of plan, non-plan expenditure, the Commission has called for classifying them into revenue and capital expenditure

– By Shaji Vikraman & Harish Damodaran

Tags: Union Budget
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