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From: Dhirendra Krishna
Sent: 21/03/2011, 3:24 PM
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Subject: [rti4empowerment] Two Decades of Neoliberalism : Outcome Budget:
Alternative Economic Survey, India:
Two Decades of Neoliberalism :Outcome Budget: An Exercise in Futility
B.P. Mathur, Former Dy. Comptroller & Auditor General and Director National Institute of Financial Management. Author of books on Economics, Finance and Public Management related issues.
Parliament authorizes the Executive to spend money as per the provisions made in the Budget, but the question is whether public officials have spent the money wisely with due regard to economy and efficiency and whether the benefits of the programmes are reaching the intended beneficiaries. From time to time, government comes out with new schemes to optimize usage of public money and gives an assurance to tax payers that money is being well spent and the intended results are being achieved. Towards this end, the government intro- duced the Performance Budget in 1970–71 and Zero-Based Budget in 1987–88, but both the schemes have failed to fulfil their objectives. From fiscal year 2005– 06 the government has come out with a new scheme called Outcome Budget. The then Finance Minister P. Chidambaram while presenting the budget (GoI 2005: 22) in Parliament in February 2005 observed, `I must caution that outlays do not necessarily mean outcomes. The Prime Minister has repeatedly empha- sized the quality of implementation and enhancing the efficiency and account- ability of delivery mechanism.
During the course of the year, together with the Planning Commission, we will put in place a mechanism to measure the devel- opment outcome of all major programmes.'
When the Outcome Budget was introduced for the first time, only the Plan schemes were brought under its pur- view. However, from 2007–08 every ministry is required to present an Outcome Budget to Parliament. The Performance Budget, which used to be presented to Parliament separately since 1970s, has been merged with Outcome Budget and a single document titled, `Outcome Budget' is presented by each ministry.
The Outcome Budget is basically a performance measurement tool. It helps in better service delivery; decision-making; evaluating programme performance and results; communicating programme goals and improving programme effec- tiveness. It measures the development outcomes of all government programmes. It tells you if the money has been spent for the purpose it was sanctioned and the outcome of the fund-usage. Outcome budget also acts as a device to fix account- ability, and forces government to manage its schemes better. In a nutshell, it is expected to ensure efficient service delivery, transparency and accountability.
When the Outcome Budget was introduced for the first time, only the Plan schemes were brought under its purview. Before discussing the impact of the Outcome Budget, we may briefly touch on the Performance Budget and the Zero-based Budget, the two major initia- tives taken by government in the past to improve the efficiency of public expenditure.
Performance Budget
With a view to provide a link between financial outlays and physical targets, government introduced a scheme of Performance Budget in 1970s, based on the recommendations of Administrative Reforms Commission (1968). The ARC (1968: 6–8) had suggested that: `A programme and activity clas- sification should be made for each department or organization. Besides pre- senting the financial needs of those programmes and activities, the expendi- ture should be classified in terms of "object," e.g., "establishment." This should be followed by a narrative explanation justifying the financial require- ments under each activity. This explanation should include information on targets, achievements and workload factors, comparative performance over years etc.'
The Ministry of Finance issued detailed instructions and guidelines for preparation and presentation of Performance Budget. Certain ministries were selected for presenting Performance Budget from fiscal year 1970–71 and the scheme was gradually extended to all the ministries dealing with development activities by 1975–76. Performance Budget document was required to include a correlation between input and output. It was also envisaged that unit cost data should be generated and exhibited in respect of important programmes where unit costing will contribute to efficiency and scientific norms should be evolved which should be the basis both for setting targets and measuring performance.
While Performance Budgets in considerable detail, correlating financial outlays with physical targets and achievements, were being presented to Parliament by every ministry, it failed to fulfil its objective of better outcome of development schemes. This was largely due to lack of commitment as well as accountability on the part of officials responsible for implementation of various schemes. The Performance Budgets thus became an annual ritualistic exercise.
Zero-Based Budgeting (ZBB)
One of the major initiatives taken by government for expenditure optimiza- tion was ZBB, introduced in 1987–88. ZBB's objective to make public expenditure programmes more effective by purposive allocation of scarce resources. ZBB required identification and sharpening of objectives, exami- nation of various alternative ways of achieving those objectives, selecting the best alternative through cost effectiveness analysis, prioritization of objectives and programmes, switching resources from programmes of lower priority to higher priority and elimination of programmes which have outlived their utility. While ZBB was launched with great deal of enthusiasm, over years it lost its momentum. The Finance Minister Yashwant Sinha again tried to res- urrect it and in his budget speech for 1999–2000, re-emphasized the need to adopt ZBB by various spending departments. ZBB has, however, not been successful due to in adequate response on the part of administrative ministries and budget executing agencies. ZBB by definition is a management process that provides for systematic consideration of all programmes and activities and without the active support and cooperation of executive agencies it can- not be successful.
Outcome Budgets — Poor Designing
Now that the Outcome Budgets are in place for the last five years, have they helped in better utilization of public funds and improved delivery of services? A study of these budgets do not provide any clue as to how various schemes and programmes are functioning and the intended outcomes are being achieved. The enthusiasm with which Outcome Budget was launched in February 2005 seems to have petered out, as in the Budget speech of the Finance Minister for 2008–09, 2009–10 and 2010–11 there is not a single line making a mention of the Outcome Budget, as a tool for monitoring per- formance of various schemes and development programmes. The Outcome Budget, to be able to serve its intended objective, should be presented to Parliament along with central government budget, but hardly any ministry presents it along with the annual Budget. While the Budget for 2010–11 was presented in February 2010, except for Ministry of Finance, no other minis- try has presented it till March 2010.
Most ministries are producing bulky documents full of figures and statis- tics detailing budgetary outlays and targets etc., of individual departments/ units rather than macro performance of the ministry and whether service delivery for which they are responsible is reaching the intended beneficiary. An idea of the infirmities of the Outcome Budget1 can be had from the following:
1. For Outcome Budget of the Ministry of Finance and other ministries see the websites of individual ministries.
One would have expected Department of Economic Affairss Outcome Budget to have dealt with macro- economic issues such as control of inflation, improvement of business climate for investment, productivity of the economy, stability of the rupee and foreign exchange position of the country.The Outcome Budget of Ministry of Finance for 2008–09 contains 295 pages, for 2009–10, 271 pages and for 2010–11, 285 pages and gives Demand- for-Grant wise information of every conceivable activity of the ministry. The Outcome Budget for each year virtually repeats the previous year format, simply changing budgetary figures. It deals with issues such as loans given to Railways for Safety Works; subsidy given to General Insurance/LIC for cover- ing insurance of people below poverty line/senior citizens, subscription of capital to nationalized banks, compensation of revenue loss to States due to implementation of VAT; and introduction of computerization and construc- tion of office accommodation in Tax department. While talking of the scheme of debt waiver to farmers, it simply mentions the quantum of money released to banks through the RBI and NABARD, rather than its impact on farmers' financial health and economic well-being. One would have expected Department of Economic Affairss Outcome Budget to have dealt with mac ro-economic issues such as control of inflation, improvement of business cli- mate for investment, productivity of the economy, stability of the rupee and foreign exchange position of the country. The Department of Expenditure's Budget should have dealt with real savings effected as a result of government's economy measures. The Outcome Budget also gives no idea of the perform- ance of Revenue Departments such as Income Tax, Excise and Customs and the tax collected vis-a-vis targets, and outcome of measures taken to curb black economy.
The Outcome budget of the Department of Higher Education for 2008–09, running into 136 pages, details various institutes of higher learning and regu- latory bodies such as UGC and AICTE, and mentions that 98 percent of the budget is given as grants-in–aid to the autonomous bodies which are man- aged through their independent governing councils on which the ministry has no control. The Outcome Budget for 2009–10, running into 167 pages, has adopted the format of the previous year and elaborates in great detail the budget allocation, targets etc., of various institutes of higher learning, as well as various educational schemes. However, it gives no idea of outcome of gov- ernment's policy of expansion and accessibility of higher education to every- one, particularly the disadvantaged groups and its qualitative improvement.
The Outcome Budget of Ministry of Transport for 2009–10 is a confused document with jumbling of incoherent statistics. While it talks of improve- ment of arterial routes of 54,600 kms of National Highway, it gives no idea of the progress of its construction on various critical stretches, from the time the project was being implemented, the shortfall in meeting targets and the target date by which it will be completed. Taking one-year framework, it says that during 2009–10, 8672 km of roads will be improved, along with con- struction/rehabilitation of 200 bridges and 29 by-pass roads at a cost of
Rs. 13,153 crore. For projects above Rs. 10 crore, its targets are fixed in terms of time taken to award contract (one year from the time project has been approved) and time period within which construction job will be completed (3 years from the date of award of the contract). Such targets are meaning- less — they should be fixed in terms of the time-framework by which the road is physically constructed and is available for use by public.
The Outcome Budget of the Ministry of Power for 2009–10 talks about just one programme, Rajiv Gandhi Vidyutikaran Yojna (RGVY), and says that by March 2009 electricity has been provided to 59,880 un-electrified villages and 53.78 lakh BPL households and has fixed a target of providing electricity to 17,500 villages and 47 lakh BPL households for 2009–10. It makes no men- tion about availability of 24 hrs electricity to every household in the country and meeting the needs of industry, and commercial establishments. No targets are given regarding additional generation of electricity in terms of mega watts and measures to fulfill the vast pent up demand in the country. The document running into 236 pages with huge jumbling of statistics talks about perform- ance of various PSUs such as NTPC, NHPC, PFC etc., which is already cov- ered under the MoU system of Department of Public Enterprise.
The Outcome Budget of the Ministry of Rural Development (2009–10) is one of the few well-prepared budgets, which focuses on objectives of various poverty alleviation schemes launched by the government. Its flagship pro- grammes are: MNREGA, which guarantees 100 days of wage employment to every household with an outlay of Rs. 39,100 crore; rural housing, Indira Awas Yojna (outlay Rs. 8800 crore), meant for giving financial assistance for construction of dwellings to those below the poverty-line; and Pradhan Mantri Gram Sadak Yojna (outlay Rs. 18,500 crore) for construction and upgrada- tion of roads for better rural connectivity. The ministry has devised a mecha- nism to monitor the implementation of some of its schemes by appointing independent monitors, but they do not enjoy any authority to correct a wrong or default if it comes to their notice. Studies by NGOs and other evaluating agencies show that the benefit of most of these programmes does not reach the intended beneficiary. There is need for a high-level independent evalua- tion team to monitor and take corrective action so that the benefit of various poverty alleviation programmes reaches the target population.
Much of the problem arises due to the Finance Ministry's poor under- standing of the purpose and intent of the Outcome Budgets. The Ministry of Finance has prescribed in great detail the format under which this budget should be presented. According to its instructions, the Outcome Budget2 of
2. Ministry of Finance, Department of Expenditure O.M No 2(1) Pers/E.Coord/OB/2005 dated 6 May 2009 and 6 January 2010.
...the Outcome Budgets of each ministry have become a huge mass of incoherent data and figures, having no relation with outcome of development schemes with which the public is concerned. An expert on government...
each ministry should contain six chapters containing: introductory note on the organization and function of the Ministry; list of major programmes/ schemes implemented by the ministry; its mandate, goal and policy frame- work; budget estimates, scheme-wise analysis of physical performance and linkage between financial outlays and outcome; targets and achievements and plans for future; and review of performance of statutory and autonomous bodies under the administrative control of the Ministry.
As a result of these guidelines, the Outcome Budgets of each ministry have become a huge mass of incoherent data and figures, having no relation with outcome of develop- ment schemes with which the public is concerned. An expert on government performance, Robert D. Behn observes,
Most government dashboards contain so much data that they are useless. It isn't obvious what data are relevant and what data aren't. Too, often these dashboards are little more than data dumps. Consequently, citizens are confused: What data may provide what kind of clues about agency's performance? Furthermore, even if a citizen is con- cerned about a specific aspect of government performance, and even if this citizen has figured out what measure captures this specific aspect of performance, how can the citizen decide whether the reported results are outstanding, good, fair, or stinko? (Behn 2009)
The 2nd Administrative Reforms Commission faulted the existing prac- tice of preparing outcome budget for every item in the Expenditure Budget. `The commission is of the view that the Outcome Budget cannot be prepared for all Ministries/Departments simply by way of declaration. It's a complex process and a number of steps are involved before it can be attempted with any degree of usefulness' (GoI 2009: 88). It suggested preparation of Outcome Budget only for certain flagship programmes and certain national priorities, after proper preparation and training.
It is obvious that Outcome Budgets of various ministries are not serving any purpose and have become an exercise in futility.
Aligning Outcome Budget with Eleventh Plan Targets
The purpose of Outcome Budget should be to make ministries and organiza- tions mission-driven, clearly give their Vision and Mission Statement and tell how they are going to fulfil it. They should focus on the purpose of the organ- ization, give attention to what is important and to set organizational goals to align practices with these values. In the absence of clarity about the objective of Outcome Budget the whole exercise becomes a mechanistic ritual.
The Outcome Budget of individual ministries should be aligned to Five Year Plan targets. The Eleventh Plan 2007–12 aims at inclusive growth, which according to the Plan document is best done by adopting monitorable targets, reflecting the multi-dimensional economic and social objectives of inclusive growth. The Eleventh Plan (GoI 2008: 23–24) has fixed 27 targets at national level under 6 categories: (i) Income and Poverty; (ii) Education; (iii) Health; (iv) Women and Childcare; (v) Infrastructure; and (vi) Environment. To illus- trate, some of the targets are : agriculture GDP growth rate at 4 percent per year on average; generation of 58 million new work opportunities; reduction of unemployment among educated to less than 5 percent; developing mini- mum standards of educational attainment in elementary schools, to ensure quality education; reduction of dropout rate of children at elementary level to 20 percent by 2011–12; increasing literacy rate of children of 7 years or more to 85 percent by 2011–12; reduction of Infant Mortality Rate to 28 and Maternal Mortality Rate to 1 per 1000 live births by end of 11th plan; reduc- tion of fertility rate to 2.1 by end of the Plan; clean drinking water to be avail- able to all by end of 2009; ensuring electricity connection to all villages by 2009 and reliable power by end of the Plan; ensuring all weather road connec- tion to all villages with a population of 1000 and above by 2009 and all sig- nificant habitation by 2015.
The Outcome Budget of individual ministries should be dovetailed to the targets fixed in the 11th Plan. Many of the targets are cross-departmental in nature and need coordination between different ministries and departments. It is desirable that one single Outcome Budget for the entire Government of India is prepared by Planning Commission jointly with
Finance Ministry, clearly delineating responsibilities of individual ministries in implementing the targets. Instead of present one year, they should be a three to five year time framework, so that their performance could be gainfully measured. The UK's Public Service Agreements can provide valuable guidelines in this regard (dis- cussed in subsequent section).
Redefining Outcomes
In order to measure outcomes and put in place an effective performance man- agement framework, there is need for five building blocks (UK Treasury 2000):
i. A Vision: Every ministry/department must have a clear vision and sense of direction about its goals and objectives, which is derived from the needs and preferences of customers and other stakeholders.
ii. A Coherent Set of Measures and Targets: The next step is to translate these aspirations into measures and targets which should be of a man- ageable number; both long (3 to 5 years) and short term (the year ahead); financial and non-financial and a mix of input, output and outcome measures. The whole ministry and its field formation should
Outcome Budget: An Exercise in Futility
The Outcome Budget of individual ministries should be dovetailed to the targets fixed in the 11th Plan. Many of the targets are cross-departmental in nature and need coordination between different ministries and departments.
The NPM emphasizes deregulating internal management of public bureaucracies and decentralizing and streamlining various management processes such as budgeting, personnel and procurement. The approach includes market-driven management practices, competition to reform the public sector from inside and introduction of some of the private sector management practices. understand the link between targets and where the responsibility for its implementation lies. One should remember the dictum: what gets measured gets done.
iii. Ownership and Accountability: Every target, both long and short-term must be `owned.' This can be done either individually or collectively (by teams or units) but must result in specific responsibilities for delivering each target. Ultimately individuals and teams must feel and held accountable for delivery.
iv. Rigorous Performance Review: When accountability for delivering against individual long and short-term targets has been clearly defined, a rigorous performance monitoring and review system needs to be put in place.
v. Reinforcement: Success in delivering targeted performance should result in real consequences at an individual level. A mix of reinforce- ments needs to be used, including financial rewards, career opportu- nities and other non-pay incentives.
It needs to be remembered that systems alone cannot deliver high perform- ance. They need to be embedded in the culture and values of an organization. Leadership plays a crucial role and top managers must lead by example.
BudgEting for rEsults — intErnational ExpEriEiEncE
During last two decades, several developed countries which have faced the problem of inept public bureaucracies and fiscal profligacy, have met the chal- lenge by taking some bold reform measures, in what has come to be known as New Public Management (NPM).3 The NPM emphasizes deregulating inter- nal management of public bureaucracies and decentralizing and streamlining various management processes such as budgeting, personnel and procure- ment. The approach includes market-driven management practices, competi- tion to reform the public sector from inside and introduction of some of the private sector management practices. As part of budgetary reform, the NPM envisages change in the existing budgetary practice of `input orientation,' where funds are sanctioned without correlating it to the `output,' and shifts emphasis on what `results' are delivered when funds are parcelled out.
USA has enacted Government Performance and Results Act 1993, with a view to improve efficiency and effectiveness of governmental operations and to focus on results, service quality and public satisfaction. New Zealand, which has during last decade put in place a highly efficient public management system, is governed by three key pieces of legislation — State Sector Act 1988, Public Finance Act 1989 and the Fiscal Responsibility Act 1994. The objec- tive is to improve the productivity of public managers, give them greater flex- ibility, focus on what they produce, and to promote consistent good quality fiscal management. The most fundamental changes have been introduced in UK.
The UK Experience
UK has launched Financial Management Initiative (FMI) in 1982, through a widespread reform of public services for which lead was given by the then Prime Minister Margaret Thatcher. FMI's thrust was budgeting for results and providing value for money. The objective was to mould budget into a contract for performance. FMI implies delegated budgeting in which respon- sibility for resources is pushed down the line to budget holders who are to be given sufficient flexibility and incentive to produce value for money. These reforms were followed by Next Steps Initiative under which most depart- ments concerned with delivery of services to the public were converted into autonomous agencies.
As part of reform, the methods of appointment and promotion to top grades of civil service were changed. A contract regime and a system of lateral entry model effectively replaced the old closed entry system for top posts. These reforms continued with the introduction of Citizen's Charter for all public services. In 1997, UK has introduced Fiscal Responsibility Code whose main feature is comprehensive spending review with expenditure planned firmly for three years and public service agreements which are quasi- contracts between Treasury and each department about what they would deliver in return for the budget funding. As part of Comprehensive Spending Review, the government brought out a White Paper in July 1998, which gives measurable targets in the form of Public Service Agreements (PSAs), which has three-year focus. They are expressed in terms of end result that taxpayers' money is intended to deliver.
UK Public Service Agreements
Public Service Agreements (PSAs) are fundamental to governments' approach to deliver world class public services, combining with clear national goals and high degree of transparency. With the introduction of PSAs, the debate has shifted from outlays, to how effectively resources are being used and whether services are delivering the outcomes that will really make a differ- ence to people's lives. PSAs increase local autonomy and are focused on
A better quality of life, includes: improvement of health, safety and wellbeing of children and young people; and promotion of better health and wellbeing for all. Each Vision Statements are accompanied by means of measuring them together with a strategy of delivering them.
results, not prescribing the means or process of delivery and give frontline managers freedom to innovate and to take decisions about the most effective and efficient means of delivery.
The key principles of reform are (UK Treasury 2004: 2–3):
l Clear, long-term, outcome-focused goals set by the Government;
l Devolution of responsibility to public service providers with maxi- mum local flexibility and discretion to innovate and incentives to ensure that the needs of local communities are fulfilled;
l Independent and effective arrangements for audit and inspection to improve accountability; and
l Transparency about what is being achieved with better information about performance both locally and nationally.
The idea is to set Specific, Measurable, Achievable, Relevant and Timed targets related to outcomes, in what is called SMART.
Public Service Agreements 2008–114 has a streamlined framework of just 30 PSAs, each supported by a handful of indicators. They range across the busi- ness of government from more traditional public services such as education, health and crime to improving economic productivity, tackling climate change and reducing child poverty. The PSAs are expressed as high level departmental objective which require contribution from across UK Central government. PSAs have set the following vision: 1) Fairness and Opportunity for All; 2) A better quality of life; 3) Stronger Communities; 4) A more secure and environ- mentally sustainable world; and 5) How people and business come through the downturn sooner and stronger, supporting long-term economic growth and prosperity. Thus, for example, the vision Fairness and Opportunity for All includes among its goals: Halving the number of children in poverty by 2010– 11, on the way to eradicating child poverty by 2020; and raising the educa- tional achievement of all children and young people. The vision, A better qual- ity of life, includes: improvement of health, safety and wellbeing of children and young people; and promotion of better health and wellbeing for all. Each Vision Statements are accompanied by means of measuring them together with a strategy of delivering them. To give an example, the educational stand- ard of children and young between the ages 14 and 19 is judged by the level of proficiency they attain in English and Maths. The vision on health care aims to improve life expectancy and mortality rate. It has set a target to reduce mor- tality in case of cancer by 20 percent and heart disease by 40 percent of people below 75 by 2010. The delivery mechanism includes a National Service. See UK Treasury website; and Hall 2009.
Framework for Older People which includes improvement of physical fitness and overcoming barriers to leading an active life.
changing outdatEd BudgEtary practicEs
A large part of the problem of poor outcome of public expenditure in India arises due to outdated budgetary practices followed by the Ministry of Finance and its inability to design them to the needs of huge techno-struc- ture of a welfare state. The administrative ministries, departmental heads and field outfits face two major problems in implementing development schemes.
a) System of annual budgeting, leading to lapse of money at the end of fiscal year and rush of expenditure in the month of March, resulting in tremendous waste of public money.
b) Centralized control of the Finance Ministry due to which administra- tive ministries and field outfits are unable to make optimum utiliza- tion of money and use their best judgement.
Multi-year Budgeting
Commenting on the system of annual budgeting, Aaron Wildavsky (Wildavsky 2001: 7) says it leads to, `short-sightedness, because only the next year's expen- ditures are reviewed; overspending, because huge disbursements of future years are hidden; conservatism, because incremental changes do not open up large future vistas; and parochialism, because programmes tend to be viewed in isolation rather than in comparison to their future cost in relation to expected revenue.' There is, therefore, need to move to medium-term expend- iture framework (MTEF) and multi-year perspective. The MTEF consists of a top- down resource envelope, a bottom-up-estimation of the current and the medium-term cost of existing policies and matching of these costs with available resources. Many developed countries such as Australia, New Zealand and Scandinavian countries have developed a highly disciplined and consist- ent approach to multi-year budgets and ensuring proper linkage with annual budgets.
UK's Multi-year Budgeting: The most far-reaching reforms have been introduced in UK as a result of 1998 Economic and Fiscal Strategy Report.6 Firm and Fixed Departmental Expenditure Limit (DEL) plans are set for.
For a detailed discussion, see Schiavo 1999 and Premchand 2000. 6. Website HM Treasury; www.hm-treasury.gov.uk/Spending_Review.
Departments have the flexibility inside overall limits to reprioritize expenditure to meet their objectives most efficiently. Expenditure which cannot be subject to firm multi-year limits is known as Annually Managed Expenditure (AME).
Administrative ministries have been given very limited powers to re-appropriate funds from one head to another
three years going forward, which is planned and controlled on yearly basis in biennial Spending Reviews. To enable spending programmes to be planned over medium term and to avoid end of the year spending, the new regime allows full year flexibility — that is, departments can carry forward any unspent resource to future years. End-year flexibility removes the perverse incentive for departments to use up their provisions as the year-end approach- es without getting value for money. By the same token, the departments can- not now look to an annual survey to bid up demands. Within the longer horizon provided by DELs, the government has been able to remove unneces- sary lower level controls on spending, operating instead through overall limits and performance targets rather than through micro-management through a detailed system of approvals. Departments have the flexibility inside overall limits to reprioritize expenditure to meet their objectives most efficiently. Expenditure which cannot be subject to firm multi-year limits is known as Annually Managed Expenditure (AME). AME includes social security bene- fits, payments under Common Agriculture Policy, debt payments etc. Controlling this more volatile expenditure outside three-year totals means sensible long-term planning is not precluded by short-term led fluctuations.
Decentralization of Authority
Decentralization of authority and delegation is an important component of budgeting for results. This implies that responsibility for resources is pushed down the line to budget-holders who are to be given sufficient flexibility and incentive to produce value for money. At present, the functioning of the Finance Ministry is highly centralized and it tightly controls the spending of money. Some of the problems are:
a) Line item budgeting, which implies that expenditure limits for every item is fixed. This gives no flexibility to a particular department or field outfit to spend money as per their priority.
b) Administrative ministries have been given very limited powers to re- appropriate funds from one head to another (presently there is a limit of Rs. 5 crore). Thus, if the Department of Non-conventional energy wants to transfer money from the gobar gas project, where there is saving, to the solar energy research, where it has pressing need, it can- not do it.
c) The Finance Ministry issues economy orders from time to time to regulate expenditure on sundry items such as air travel, staff car, office maintenance, employment of temporary staff etc, taking away even the limited delegation which the administrative ministries/heads of department enjoy effecting their operational efficiency. The Finance Ministry/Vigilance Commission have issued instructions circum- scribing the discretion of various departments/PSUs for purchases and entering into contract, as a result they cannot buy high quality equipment and products using their best judgement.
Administrative ministries and departmental heads should be given full control, authority and flexibility over the money allocated to them in the Budget. Their accountability should be in terms of results. Eswaran Committee (Eswaran 1996: 96 & 104), appointed by the Ministry of Finance, had plead- ed for wide delegation of powers and observed that, `the administrative min- istries, as the authorities concerned with detailed policies and programmes for implementing them, should be empowered to take decisions and take respon- sibility for them fully. ... Once the budgetary ceilings are determined, the administrative ministry will have freedom to operate within the approved ceilings in respect of each scheme.' The Fifth Pay Commission (MoF 1997: 155) had also pleaded to the same effect, `It would be more appropriate if Finance Ministry approves the overall budget for different ministries and thereafter allows them sufficient flexibility to manage the financial resources in the most productive manner irrespective of various heads under which it is spent.'
profEssionalizing managEmEnt
One of the main reasons for failure of Performance Budgeting and ZBB was the lack of commitment and will on the part of top leadership to implement the programme. Outcome budgeting seem to be going the same way, and does not seem to have made any impact in improving the delivery of public services. There is lack of professionalism in the Ministry of Finance as well as Integrated Financial Adviser (IFA) Wing attached to each ministry. Senior Finance jobs in the ministry are highly specialized and technical, where one deals with appraisal of projects, viability of schemes, vetting of high-value contracts, interpretation of financial rules and control over funds need a sound knowledge of planning, budgeting, expenditure management and accounting and auditing techniques. Lately, there has been an increasing ten- dency on the part of the government to post generalist administrators drawn from IAS to the Finance Ministry/FA's post, instead of drawing officers from the Central Finance & Accounts Services (IA&AS, ICAS, IRAS, IDAS), who possess the necessary background, training and experience in finance, accounts and audit. Even for junior posts of Section Officers and Under Secretary in the MoF/IFA wing, officers are drawn from Central Secretariat Service.
Once the budgetary ceilings are determined, the administrative ministry will have freedom to operate within the approved ceilings in respect of each scheme.
One of the main reasons for failure of Performance Budgeting and ZBB was the lack of commitment and will on the part of top leadership to implement the programme.
...all moved towards a philosophy of New Public Management. Its main components are provision of high quality services that citizens value, coupled with increased autonomy to public managers with high degree of accountability.
There is a need to redesign the Outcome Budget by clearly enumerating the vision, goal and objective of all ministries/departments as well as major programmes and schemes and lay down a coherent set of targets against which performance could be measured.
do not possess the requisite professional qualification, training and experi- ence. Eswaran Committee had recommended that only officers with the nec- essary equipment, experience and background should be appointed to FA's post, and the skills of persons manning IFA (Integrated Finance Adviser) Wing should be strengthened.
Accountability for Performance
One of the biggest problems in public services in India is lack of accountabil- ity for performance. This is largely due to the security of employment with time-bound promotion based on seniority, even for top posts in the civil serv- ices. Under the existing system, there is no incentive for good work and dis- incentive for poor performance. This breeds incompetence and inefficiency across the board in public services. In order to deal with the problem of non- performing bureaucracies and make public services efficient, UK, New Zealand, Australia, Scandinavian countries and the newly emerging Asian economies such as Singapore and Malaysia have all moved towards a philoso- phy of New Public Management. Its main components are provision of high quality services that citizens value, coupled with increased autonomy to pub- lic managers with high degree of accountability. In UK, all top-level appoint- ments, such as permanent Secretaries to government, have been made con- tractual, candidates are selected by Public Service Commission through open competition, and the persons selected have to sign a MoU (Memorandum of Understanding) to deliver a specified level of performance. The introduction of NPM has achieved dramatic improvements in public service efficiency in UK and other countries. In order to improve public service delivery and out- come, we must bring an accountability regime for civil services, without which no new initiative in administrative reform can succeed.
conclusion
The Outcome Budget, introduced by the government in 2005, is a welcome development as it is intended to improve programme effectiveness and helps in better delivery of public services. However, due to poor designing, it has not been able to meet its intended purpose. There is a need to redesign the Outcome Budget by clearly enumerating the vision, goal and objective of all ministries/departments as well as major programmes and schemes and lay down a coherent set of targets against which performance could be measured. The targets of individual ministries should be aligned to measurable targets set in the Eleventh Plan in key areas such as poverty reduction, improvement of education, health, women and childcare, infrastructure and environment.
An independent mechanism should be put in place to evaluate the progress and performance of various programmes and schemes. Public officials should be held accountable for fulfilling the targets set for them.
The objective of effective utilization of public money will be achieved only when there is a rethink about some of the traditional budgetary prac- tices. There is a need to move to Medium-term expenditure framework and multi-year budgeting and do away with the system of annual budgeting, which leads to rush of expenditure at the end of the fiscal year and waste of money. There is also need for wide delegation of powers to the administrative ministries and field outfits so that they have the necessary wherewithal to deliver performance.
There is an urgent need to introduce professionalism in the personnel handling finance functions and only persons possessing necessary qualifica- tion, training and experience in finance, accounts and audit should be appointed to responsible positions in the ministries. The reform in financial management and budgeting practices has to be a part of overall package of reform in public services. In the past, reform in public services has not suc- ceeded as there is no accountability mechanism to enforce responsibility and discipline on public servants. We need a civil service which possesses high ethical standards and whose core value is embedded in integrity, impartiality and dedication to the national cause, to be able to bring the reform which the country needs.
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Outcome Budget: An Exercise in Futility
There is an urgent need to introduce professionalism in the personnel handling finance functions and only persons possessing necessary qualification, training and experience in finance, accounts and audit should be appointed to responsible positions in the ministries.
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Alternative Economic Survey, India:
Two Decades of Neoliberalism
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