The Second Administrative Reforms Commission (ARC),headed by M Veerappa Moily,has recommended that the practice of dignitaries declaring projects and schemes in the form of packages during their visits to states be stopped as such announcements led to discontent and disaffection. The Commission,in its yet-to-be released Fourteenth Report on Strengthening Financial Management Systems,has also recommended that the Plan versus non-Plan distinction needs to be done away with. Moily has since resigned from his post in the ARC to join the Union Cabinet as Law Minister. Even though detailed exercises are made over a period of time to prepare and get the Five Year Plans approved by the National Development Council and the Union and State Cabinets,projects and schemes are announced on an ad hoc basis in almost every Budget of the Union and the states. They are also announced on important national days like Independence Day,Republic Day and Gandhi Jayanti as well as during visits of dignitaries to states in the form of packages. Such announcements of large sums seriously distort the plan allocations and disturb the faithful implementation of schemes already approved and under implementation. This often leads to announcements not being followed by formal approvals thereby resulting in discontent and disaffection, stated the ARC report. The practice of announcing projects and schemes on an ad hoc basis in budgets and on important National Days,and during visits of dignitaries,functionaries to states needs to be stopped. Projects/ schemes which are considered absolutely essential may be considered in the annual plans or at the time of mid-term appraisal, it recommended. Recommending an end to the distinction between Plan and non-Plan expenditures,the ARC cited the Economic Survey 2007-08,which had put forth an argument that this distinction was illogical and even dysfunctional. The distinction leads to an ever increasing tendency to start new schemes/ projects to the utter neglect of maintenance of existing capacity and service levels. The distinction often leads to the misperception that non-Plan expenditure is inherently wasteful and should be avoided,the Economic Survey had noted. The ARC recommended,The Plan versus non-Plan distinction in expenditures needs to be abolished keeping in view its impact on budget development and public service delivery. The departments should have the flexibility in formulating their budgets with prior indication of resource availability. What ARC wants • The assumptions made while formulating Budget estimates must be realistic and subject to audit. • The method of formulation of the annual Budget by getting details from different organisations/ units/ agencies and fitting them into a pre-determined aggregate amount leads to unrealistic budget estimates. This method should be given up along with the method of budgeting on the basis of analysis of trends. This should be replaced by a top-down method by indicating aggregate limits to expenditure to each organisation/ agency. • To stop rush of expenditure toward the end of the Financial Year,the Modified Cash Management System should be strictly adhered. • A high powered committee may be constituted to examine and recommend on the need and ways for having medium-term expenditure limits for ministries/ departments through the Five Year Plans and linking them to annual budgets with carry forward facility. • A financial information system,on the lines of SIAFI of Brazil,needs to be created in the Government in a time bound manner. This system should also make accessible to the public real time data on government expenditure at all levels. • A task force to examine the costs and benefits of introducing the accrual system of accounting.
