Framework for abolition of Plan, non-Plan classification soon

Centre likely to switch to a more globally relevant system of classifying spending as revenue expenditure and capital expenditure

The government is likely to bring out a framework to remove the existing Plan and non-Plan expenditure classifications from future Budgets, switching to a more globally relevant system of classifying spending as revenue expenditure and capital expenditure. The move will link government spending to its eventual outcome more effectively.

The framework is expected to be put in the public domain by July for comments and feedback before the changes are incorporated as part of the upcoming Budget, Business Standard has learnt. The framework on how to switch from Plan/non-Plan budgeting to revenue/capital spending might also provide guidelines for states to switch over as well in a time-bound manner.
 

“The finance ministry has met the states on a couple of occasions and there are expected to be a few more meetings as well. Their feedback is being taken onboard,” said a senior government official.

Sources said the feedback process would continue well into the year with comments sought from the general public, independent experts, other government departments and further consultations with states.

The work on how to re-classify government spending items is still an ongoing one. It is understood, though, that all the administrative spending will come under revenue expenditure while capital spending and grants for creation of capital assets will be classified under the same broad category.

The proposal to abolish Plan and non-Plan spending categories at the end of the 12th and last five-year Plan (2012-13 to 2016-17) has been mooted for quite some time. The first concrete announcement on the subject was made in December by the then Finance Secretary Ratan Watal.

“In the backdrop of the abolition of the Planning Commission and setting up of the 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 expenditure is focused,” Watal had said at the first meeting of finance secretaries of states and Union territories.

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

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CHANGING SCENARIO

• The government is likely to bring out a framework to classify spending as revenue expenditure and capital expenditure only
   
• The framework will be put in the public domain by July for comments and feedback
   
• The framework might also provide guidelines for states to switch over as well in a time-bound manner
   
• In 2011, an experts’ committee headed by C Rangarajan had proposed that the distinction between Plan and non-Plan expenditure be abolished for both the Centre and the states