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The Government will soon initiate discussion on changing the classification of Government expenditure as also the role of the Planning Commission, highly placed sources told Business Line . The recommendations by an Expert Committee headed by Dr C. Rangarajan will form the basis for it.
The committee is understood to have suggested the abolition of government expenditure into Plan and non-Plan expenditure.
“The expert committee has submitted its report to the Prime Minister,” the sources said. The Prime Minister, Dr Manmohan Singh, wanted the report to be taken up for consideration after the Approach Paper to the 12th Plan is approved. The full Planning Commission under the chairmanship of the Prime Minister approved the draft paper on August 20.
It is expected that once the committee's suggestions are accepted, there could be just two classifications of expenditure — capital and revenue. Capital will account for all the developmental expenditure like investment. Expenditure on salary for government employees, interest payments, subsidy outgo etc will be placed under revenue expenditure.
Twin heads
At present, the Union Budget shows total expenditure mainly under two heads — Plan and non-Plan. Plan expenditure involves mainly asset creation through centrally sponsored programmes and flagship schemes. On the other hand, non-Plan refers to defence expenditure, subsidies, interest payments and salaries etc. Usually, non-Plan is much higher than plan expenditure ( see chart ).
The Committee is apparently not in favour of the vetting role performed by the Planning Commission for the allocation of resources for various schemes. This means the ministries can send their requests to the Finance Ministry directly. The Finance Ministry will then allocate the resources, subject to availability. This way, the ministries would not have to wait till the Budget, said a senior Finance Ministry official.
To suggest measures for efficient management of public expenditure, the Planning Commission had set up an 18-member expert committee under the chairmanship of Dr C. Rangarajan last April.
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