India may adopt US model for Plan spending

The distinction between Plan and non-Plan expenditure could be done away with in the Eleventh Plan and the Planning Commission itself recast on the lines of the Office of Management and Budget in the US, which reports directly to the President.

The Office, which reports directly to the US President, helps him formulate spending plans, evaluates the effectiveness of agency programmes, assesses competing funding demands among agencies, and sets funding priorities.

Cabinet Secretary BK Chaturvedi is slated to organise a meeting on the issue next month. "Doing away with the distinction is a difficult proposition. If carried out to its logical end, we may envisage something on the lines of the Office, which focuses on policies that should be promoted by the government," said a commission official.

"Also, ministries will be unwilling to deal directly with the finance ministry. An interface between different ministries, and between the Centre and states will be needed," the official said. He added that such a move could be considered in the Eleventh Plan.

A more likely route, however, would be re-drawing the distinction into developmental and non-developmental expenditure, officials said. The commission recently held a meeting to discuss a paper on the issue.

"The existing distinction does have some negative impact on the nature of expenditure. To tackle that, some immediate steps can be taken," officials said, adding that zero-based budgeting in non-Plan expenditure would be one such step.

Expenditure on defence, police, judiciary, food and fertiliser subsidy and interest payments may be removed from the purview of the commission, and funds for them could be found by the finance ministry from outside the plan.

There is also a case for removing governance and e-governance from the commission's work list. The commission could then look at expenditure on sectors like road development or education, officials added.