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Budget 2012: Finmin seeks to blur plan-non-plan distinction
February, 03rd 2012

The Planning Commission and the finance ministry are at odds over the accounting of plan and non-plan schemes in the budget.

While the finance ministry is pushing for inclusion of more than 10 non-plan schemes in the planned budget for the next financial year, the Planning Commission is resisting the move as it would eat into the share of existing schemes. The commission's reluctance follows an expected cut or flat allocation in gross budgetary support for most plan schemes during the next fiscal. It has agreed only on including bank capitalisation under the planned head and that too if the finance ministry makes a separate allocation for it.

The ministry is anxious to curtail its non-plan expenditure, which shot up because of ballooning subsidies during the current financial year. While planned expenditure is considered to be beneficial for the economy as it directly leads to development and creation of assets, non-plan expenditure is a general consumption expenditure that needs to be kept in check.

The move to do away with the distinction between plan and non-plan spending is line with the recommendation of the C Ranagarajan committee on public expenditure management, which was set up by the Planning Commission in 2009.

"This is being discussed between the two and we are looking at ways to sort it out. While we need to bring more schemes under planned expenditure, the increase in GBS should accommodate adequately," a government official told ET. "The interest of the existing schemes should be maintained but then accounting within the budget needs to improve."

These schemes include several programmes launched after the 11th Plan had started. Traditionally, any scheme introduced after the plan begins is automatically classified as non-plan. But the government included some schemes that began midway under plan expenditure.

With reduction in number of schemes under the non-planned head, the ministry will get room to manoeuvre its limited resources across the various heads while reining in any increase in non-plan expenditure.

The government is aiming to prioritise fiscal consolidation in the budget as opposed to the practice of expansionary expenditure in earlier budgets. With the government expected to breach the fiscal deficit target of 4.6%, it is striving to keep it below 5% in the current fiscal while aiming for a sharp cut in the next.

The non-plan expenditure till December stood at 75.9% of the budgeted target as opposed to 73% last year. Most of it is primarily due to the surge in subsidies that are expected to surpass the budgeted estimates by nearly 1 lakh crore in 2011-12.

In budget 2011-12, the government expanded the ambit of plan expenditure to include four items that were earlier classified under non-plan expenditure.

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