The Hindu Business Line : <I>Plug the biggest hole in the Budget </I>

Using the angler's parlance, the one that gets away year after year in the country's Budget is what has come to be categorised as non-Plan expenditure. Important items such as Defence, subsidies, interest, grants and loans to States, cost of maintenance of previously created assets, and the most voracious of all, establishment expenditure, are clubbed under this umbrella. It is the biggest hole (between 70 and 75 per cent of the total expenditure) in every Budget which no Finance Minister ever dares to plug. But plug it he must, for it is a silent killer coming in the way of Budget provisions translating themselves into tangible benefits on the ground.

The expenditure on Central establishment (not including Defence) had jumped 300 per cent from Rs 21,885 crore in 1996-97 to Rs 68,337crore in 2006-07 with the Budget provision for 2007-08 standing at Rs 71,256 crore.

In this background, the Government could not have done worse than voluntarily putting a financial noose round its neck by setting up the Sixth Pay Commission. Its impact is bound to be catastrophic, siphoning off money away from worthwhile projects relevant to economic growth to pay salaries and pensions to babus and bureaucrats who, next only to the legislators, know how to feather their nests and are not amenable to any rigorous norms of accountability and productivity.

Bloated bureaucracy

The Fifth Pay Commission had made its recommendations for pay increases conditional on the Government implementing a plan for the phased reduction of the personnel by 30 per cent within a period of 10 years, abolishing the 30,000 vacant posts, simplifying and bringing down the pay scales from 51 to 34, and devising and enforcing criteria and standards of output and service delivery by the employees.

Succumbing to the pressure of the already bloated bureaucracy, the Government threw these pre-conditions to the winds and raising unproductive expenditure to unprecedented levels. The Government is also sitting over the report of the Expenditure Reforms Commission, quite conceivably for the reason that it was appointed by the NDA Government. It is thereby wittingly neglecting to take action on downsizing the establishment of the 34 Ministries (barring Defence and Railways) covered by the Commission and effecting considerable savings.

The Government can tap more resources if it musters the courage to abolish the freebies and perks unjustifiably enjoyed by government personnel and employees of service undertakings such as the railways and airlines.

The ballooning subsidies which have been causing unacceptable drain on available resources constitute another nettle that Finance Ministers have been unwilling to grasp.

The deteriorating situation will be evident from the revised estimate (Rs 53,463 crore for 2006-07) exceeding the Budget estimate of Rs 46,213 crore, and the estimate for fiscal 2007 having to be pushed up still further to Rs 54,330 crore. Likewise, food and fertiliser subsidies too are constantly on the rise.

Mr Chidambaram, during his earlier stint as Finance Minister in the United Front Government, had got a report prepared in 1997 by an independent, professional agency on the best way of easing the subsidy burden.

The present team of Dr Manmohan Singh, Mr P. Chidambaram, Dr C. Rangarajan and Dr Y. V. Reddy are in the best position to put this vexed area in proper shape.

Sacred cow

Defence expenditure is treated as a sacred cow all over the world and India is no exception. Here again, the Arun Singh Committee, appointed in 1988, had reportedly covered extensive ground and made recommendations on raising the overall effectiveness of Defence forces.

0Instead of mechanically going on increasing the allocation, the Finance Minister should take the people into confidence on the measures needed and adopted for getting the maximum bang for every buck spent under this head.

B. S. RAGHAVAN

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