Event ReportsPublished on Sep 19, 2014
Former Union Revenue Secretary M.R. Sivaraman suggests that there should be a planning unit attached to the Prime Minister's Office or the Planning Ministry, to focus on indicative planning.
Planning Ministry can coordinate Commission's work
"Planning is not unique to India. Every country in this world has some type of planning mechanism. Even the most advanced market economies such as the US, the UK and Japan have economic development institutions to plan for social sector interventions, infrastructure, and also to channel investments to meet a desired level of growth", observed Mr M R Sivaraman, former Union Revenue Secretary. He was initiating a discussion on "Planning without the Planning Commission" at the Chennai Chapter of Observer Research Foundation on September 19, 2014.

The focus of the discussion flowed from Prime Minister Narendra Modi's recent announcement to dismantle the existing Planning Commission, a 63-year-old legacy. In the Independence Day speech, the Prime Minister proposed to set up an alternate institution in its place. In this context, the discussion at ORF-Chennai focused on a possible alternate institutional mechanism, its functions, aspects of coordination between the Centre and the States in matters relating to planning and development, and a brief discourse on the Planning Commission as it exists today.

The Independent Evaluation Office (IEO) set up during the UPA-II regime was tasked to evaluate the relevance of the Planning Commission, Mr Sivaraman recalled. This institution submitted its report early this year to the government of the day. Though the full contents of this report are yet to be made public, the IEO has reportedly recommended that the Planning Commission in its current form and functions needs to be restructured to serve as a think-tank of the government.

Holistic planning

In speaking about planning as an activity, Mr Sivaraman said, centralised holistic planning started in erstwhile Soviet Union. While every country has a planning mechanism, not all of them are involved in holistic planning. The UK has an econometric model associated to its Treasury Department and the US has an economic development agency under the Department of Commerce to plan for development in certain counties, physical infrastructure, research and education.

In India, Mr Sivaraman pointed out, Central ministries prepared their Plan budget allocating financial resources to various programmes and schemes run by them. These Plan budgets are then vetted by the Planning Commission. In turn, the Planning Commission comprises self-contained divisions, each linked to a particular ministry. These divisions validate the plan programmes and budget of the ministries concerned. The Plan budgets are then forwarded to the Finance Ministry for inclusion in the Union budget.

The Planning Commission plays a major role in determining the amount of market borrowing required to finance plan programmes and schemes. However, it is the ministry that has the final say in devising and prioritising the plan programmes and schemes. In the case of State plans, the Planning Commission vets whether the States have adequate financial resources to support the Plan programmes.

Two aspects emerge from this discourse -- one, the ministries lay down the policies and programmes and the Planning Commission has very little control over them except for allocating the loans to finance these programmes. Two, duplication of work at the Planning Commission and the individual ministries in validating plan programmes and schemes.

One-size-fits-all approach

Speaking on classification of government expenditure into Plan and Non-Plan categories, Mr Sivaraman said this classification mechanism has incentivised the centre to focus more on new projects, classified under planned expenditure while giving less importance to operational expenditure classified under the non-plan head.

Several projects, which get liberal grants during their plan period, fail to achieve desired outcomes owing to subsequent low transfers during their operational phase. Mr Sivaraman further stated that the Rangarajan Committee recommended doing away with the Plan/Non-Plan classification and having an outcome-based budget.

The Planning Commission has also been an instrument of centrality. Several Central schemes and programmes have taken a one-size-fits-all approach, which have not been particularly successful in certain States. Further, there is also duplication in terms of similar programmes and schemes run by the States and the Centre, such as the National Social Assistance scheme.

States have their own development priorities and are best poised to evaluate their resources, developmental needs and execute programmes. Under the Central plan assistance, nearly Rs 1 lakh crore has been transferred directly to district-level institutions for implementing the Central schemes. The contingency expenditure component in this transferred corpus has led to pilferage resulting in superfluous expenditure.

Mr Sivaraman noted that the Planning Commission has done a commendable job in aggregating statistics from various ministries and undertaking several studies and research work pertaining to social and economic development.

Alternative mechanisms

Speaking about alternatives to the Planning Commission, Mr Sivaraman opined that the Planning Ministry must continue to exist, to assimilate and assess the diverse needs of the country. He suggested that there should be a planning unit attached to the Prime Minister's Office or the Planning Ministry, to focus on indicative planning. The planning unit shall be a short-staffed organisation as opposed to the Planning Commission.

Working groups or committees comprising national and international experts can be set up when required for specific projects to chart out a plan of action. These ad hoc committees shall comprise of technical and subject matter experts as opposed to the generalists who currently man the Planning Commission.

He also stated that the Planning Ministry could be converted into a semi-evaluation ministry in charge of monitoring and evaluating Central programmes and schemes. The Ministry shall derive expertise from the existing Programme Evaluation Office (PEO) under the Planning Commission. Summarising his viewpoints on the alternative mechanism, Mr Sivaraman opined that the Planning Commission in its current form could be transformed into a major evaluation organisation, expanding on the PEO.

Democratic and participative exercise

Answering a question on planning as a democratic and participative exercise, Mr Sivaraman said the Kerala model of planning at the village panchayat-level was an effective one, but contextual factors have greatly contributed to its success. In examining the Kerala model, Mr Sivaraman said, Kerala has devolved considerable fiscal powers on the local bodies, allowing panchayats to collect several taxes and levies.

Fiscal repertoire juxtaposed with high level of literacy at the gram panchayat level has allowed substantial developmental efforts to come from the lower-level, and has contributed to an inclusive growth in the State. Mr Sivaraman also opined that the Centre must run only essential programmes while providing indicative guidance to States to plan, design and implement programmes under the State subjects such as health, sanitation, irrigation, education, etc.

China's National Reform and Development Council (NRDC) offered another dimension in seeking to restructure India's Planning Commission. The NRDC has served as the chief coordinating agency, which lays broad outlays in planning for infrastructure and other social sector interventions. This institution guarantees that credits are issued by public sector banks for development projects. In India, several State-backed credit institutions have descended into oblivion owing to un-kept project schedules, cost overruns and ultimately failure to complete projects to which credit has been directed.

(This report is prepared by Deepak Vijayaraghavan, Chennai)

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