The Hindu Business Line : Outcome Budget — Credible evaluation only from independent agency

AS PROMISED in his annual Budget for this fiscal, the Finance Minister, Mr P. Chidambaram, has come out with an Outcome Budget for 2005-06. The Prime Minister had emphasised then, as also in several recent speeches, the need to turn our attention to outcomes instead of financial outlays as such.

The conversion from outlays to outcomes is what constitutes the essence of good governance. The intention behind the new outcome budget is, indeed, commendable. It seeks to focus the attention of the public — in particular, the parliamentarians — on the outcome of various schemes and programmes, as distinct from the figures of outlays.

The effort involved various Ministries and the Planners, besides the Department of Expenditure. Any initiative of this kind is bound to have flaws and it would be unrealistic and uncharitable to expect perfection in this first effort. All the same, the outcome of the outcome budget leaves much to be desired, perhaps as a result of the complexity of the task and the difficulty of capturing in quantitative targets the various objectives of a country's programme.

Not a new idea

The idea of an Outcome Budget is not perhaps entirely original. In the 1970s, the concept of programme budgeting gathered strength in various countries. Particularly, it owed much to Mr Robert McNamara's efforts in the budgeting of the US Department of Defence.

In India, thanks to the pioneering efforts of Mr A. Premchand, formerly of the IIPA, Delhi and later of IMF, an indefatigable advocate of expenditure control and performance budgeting, many States and the Centre had embarked on preparation of departmental performance budgets, which set out as comprehensively as possible the targets of physical performance side by side with the financial outlays for each department.

This exercise is still in vogue both at the Centre and in some of the States, Tamil Nadu being a leading exemplar. Performance budgets are easier to understand than the present Outcome Budget, which is a series of tables indicating outlays and measures of physical targets amidst a clutter of confusing abbreviations.

While considerable effort has gone into the preparation of the Outcome Budget, it shows signs of some rather scrappy homework. Against a good number of schemes listed in the Budget, it is noted in the outcome budget that "the schemes are still under finalisation" or that "Expenditure Finance Committee scheme approval is expected" or that "CCEA (Cabinet Committee on Economic Affairs) is still to approve".

The least that one expects out of a budget of the type presented is that the Outcome Budget is restricted to such schemes as have been approved. The frequency of lack of approval for schemes varies from Ministry to Ministry. But, at a minimum, an Outcome Budget should be clear as to when the approval is to be expected.

`Bamboo'zling

I am tempted to illustrate by an example how casual the exercise has been. The example pertains to the entry on National Bamboo Mission — a scheme chosen at random but still representative of the Budget. The statement of objective shows the broad aims of the Mission. The quantifiable targets are laid out in precise terms as so many million tonnes of bamboo per year from the fourth year onwards, coverage of 1.68 lakh hectares under bamboo over five years, improvement of existing stock in 8,200 hectares, coverage of 7,000 hectares in macro-irrigation, etc. An outlay of Rs 100 crore is indicated for 2005-06.

The crowning glory of the listing of the Bamboo Mission entry in the Outcome Budget is that the outlay has not yet been approved. And that too after almost half the budget year is over. This shows a lackadaisical approach to budget-making and implementation.

I turn now to another item, which figures importantly in the programme of the Agricultural Ministry. The National Horticultural Mission, which has been much awaited as part of the diversification of the rural economy, also reflects a similar casual approach.

While an outlay of Rs 70 crore has been indicated for the National Horticultural Board (NHB) and associated cold storages, the financial phasing is not clear. The target is specified as 1,100 horticulture units. But greater detail on how many cold storages are to be set up, and when, would have been helpful both to the planners and implementers.

The Outcome Budget shows that the NHB has been handicapped at the very start. Under the heading "Remarks/Risk Factors", the document states the NHB may fall short of funds as horticulture promotion is attracting increased response.

This is, indeed, a rather poor way to start an innovative scheme. But worst of all is that the outcome budget is not clear about phasing of different elements of the programmes, but ready with excuses, including lack of funds.

Too much detail

The Outcome Budget exercise takes on a different flavour in Ministries such as Power and Industries. In these cases, there seem to be too many details of various programmes under implementation in the different PSUs. While it is, of course, instructive to follow through the details of rehabilitation of individual power stations or of particular industries, it is not clear how effective it will be as a tool to monitor the progress of the overall budget.

There has to be selective inclusion of details in respect of specific PSUs where the programmes are critical to their successful functioning and completion of plan targets. Whether Parliament will or should be interested in looking into too many details of rehabilitation of PSUs is another question. This belongs rightly to a separate exercise with regard to PSUs themselves.

Obviously, the Outcome Budget is good only if it is used properly to correct errors and bring about faster progress. This brings up the question of evaluation. At one time, an evaluation organisation worked effectively and contributed its insights on implementation problems and flaws in policy.

One would be justified in expecting that an efficient Project Programme Evaluation Organisation be set up, working under the guidance of Mr Montek Singh Ahluwalia, who headed the first Programme Evaluation Organisation of the International Monetary Fund.

We need such agencies at State level also. Such organisations, where they exist, are pale imitations of their successful exemplar at Yojana Bhawan. They suffer from under-funding and under-staffing.

I am aware that various efforts have been made to set up and run Programme Evaluation Organisations in some State Governments. But few of them have covered themselves with glory. It is important to emphasise that the Finance Minister and the Deputy Chairman, Planning Commission, need to revive and reinvigorate the Programme Evaluation Group, both at the Centre and the States.

With all my reservations, I must grant that the Outcome Budget presented by Mr Chidambaram represents a tremendous effort by different layers of bureaucracy. It would perhaps be better if the Government were to concentrate the effort in a few select areas rather than spread itself thin across different layers of planning and administration.

Ideal with the Budget

While it would be a Herculean effort to attempt produce a programme or performance budget at the same time as the "money" budget, it makes sense to present at least part of the next Outcome Budget at the same time. The very exercise of formulating the Outcome Budget at the time of the conventional budget, or as close to it as possible, will help speed up the approval process as also concretise the thinking on various risks to be faced and overcome in programme implementation.

If I am not mistaken, the Outcome Budget itself has been the subject of consideration by the Standing Committee of Parliament. It seems desirable that the analysis of evaluation results of the outcome budget be also placed before an appropriate Standing Committee for each sector of activity.

Obviously, it is too much to expect one Omnibus Committee on Finance to consider what is an all-embracing review of different sectors of government activity. It may also be worthwhile to invite a few State Government representatives to participate in the evaluation exercise. This is necessary because in many of the schemes State cooperation and funding is involved.

The above critique should not be mistaken as detracting from the Government's pioneering effort at transparency and earnestness in securing outcomes. The outcome of the Outcome Budget will meet its framers' expectations fully only if an independent evaluation agency is assigned the task of assessing how far the outcomes have come up to expectations as listed in the document. It is to this task that the Finance Ministry has now to turn its attention.

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