Finmin mulling abolishing plan, non-plan expenditure

New Delhi: In order to link expenditure to the outcome more efficiently, government is mulling doing away with the practice of classifying it as 'plan and non-plan' in the Budget documents and replacing that with 'capital and revenue' spending.

At a meeting with his state counterparts, Union Finance Secretary Ratan Watal said the classification is losing its significance after abolishing the Planning Commission and states could also deliberate on the same.

"In the backdrop of the abolition of Planning Commission and setting up of NITI Aayog, the classification of expenditure as plan and non-plan is in the way of losing its relevance. If the accounting of expenditure is classified broadly under revenue and capital...I think this is where the focus is," Watal said in his address.

In 2011, an expert committee headed by C Rangarajan had proposed that the distinction between plan and non-plan expenditure be abolished for both the Centre and states.

Watal said: "This classification will facilitate linking expenditure to outcome and better public expenditure management. Simplification of accounting heads and routing of heads of expenditure as revenue and capital could reflect the direction of public expenditure in a better way."

The ministry, he said, has already started deliberation to move towards this.

"We still have time left for the 12th Plan (2012-17) for which we will continue with this, but perhaps this (capital and revenue expenditure) is something which you could also look at the state level. This will give the right direction in simplification of accounts and also how we focus on expenditure," Watal said.

Watal, who is also the Expenditure Secretary, said it was necessary for Centre and States to work in tandem for better public expenditure management and fiscal consolidation.

He highlighted four points which would be discussed in the day-long meeting with the states. These include the need for the Centre and states to work in tandem towards fiscal consolidation.

"It is imperative to rationalise expenditure to remain within the available resources. Rationalisation of expenditure on subsidies, cutting down certain expenditure of revenue nature and improvement in revenue cannot be overemphasised," he said.

Also the meeting would discuss decentralisation and devolution. Watal noted that the cess based schemes, like education or Swachh Bharat mission, may undergo some kind of change if the GST comes into play, when all these may have to be phased out. "So we have to see how best we can manage these schemes," he said.

Besides, expenditure management, liquidity and fund flow planning which impinge on financial management would also be discussed. He also suggested that devolution of states shares in Union taxes be done by the 8th of each month.

States and the Centre at today's meeting would also discuss capital expenditure and social sector spending particularly targeting women, children and youth for balanced development.