The Telegraph
Friday , July 11 , 2014
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Check on expenditure on govt agenda

New Delhi, July 10: The Modi government has taken a stab at expenditure reforms which is slated to spiral to Rs 17,63,214 crore an increase of almost 11 per cent over the revised estimate of Rs 15,90,434 crore.

Finance minister said the commission would give its interim report within this financial year.

The government did not say what it had in mind though it did indicate that it wanted to overhaul the subsidy regime “including food and petroleum subsidies and make it more targeted while providing full protection to the marginalised, poor and scheduled castes and tribes”.

The budget documents show that the major subsidies food, fertiliser and petroleum account for Rs 2,51,397.25 crore, or just over 14 per cent of its total expenditure.

Food subsidy is the biggest chunk of the subsidy bill at Rs 1,15,000 crore. A big slice goes towards the public distribution system and central procurement of foodgrain.

Twelve states, including Andhra Pradesh, Uttar Pradesh, Bengal and Tamil Nadu procure foodgrain in their states through the PDS system which underpins some welfare schemes.

Recently, the Bihar government launched a direct cash payment system and the government said today that it was trying to persuade other states to adopt the scheme.

In 2011, a high-level committee headed by C. Rangarajan had submitted a report on the “efficient management of public expenditure” that made some radical suggestions. Claiming that the distinction between plan and non-plan expenditure was artificial and had become dysfunctional, the report said this separation should be removed.

“There should be a shift in the approach of public expenditure management from a segmented view of plan and non-plan to a holistic view; from a one-year horizon to a multi-year horizon and from input-based budgeting to the budgeting linked to outputs and outcomes.”

The report had also suggested a broad re-definition of the roles of the finance ministry, Planning Commission, administrative ministries and state governments in the formulation and implementation of the Plan.

The Rangarajan committee had suggested that the classification of expenditures in the budget into heads like revenue and capital ought to be continued.

Capital expenditure, it said, should relate to creation of assets and be “determined by ownership criterion”. It said all transfers should be treated as revenue expenditure in accounts.

The Modi government, which did not spell what sort of expenditure it really had in mind, could find some radical ideas in the Rangarajan report. However, it may instead opt to go over the 10 reports that were prepared by an expenditure reforms commission that was formed by the Vajpayee government.