<p>It works like this. At the end of each financial year, a substantial amount of budgetary grants remain unutilised in several departments, mainly because of poor or non-implementation of various schemes.<br /><br />For instance in 2008-09, Minor Irrigation Department could utilise only Rs 432 crore out of Rs 528 crore earmarked. A little readjustment of accounts and these funds could be passed off as ‘savings’. <br /><br />It’s a little secret method of cost cutting that the Finance Department (FD) sometimes indulges in, a senior officer in Department admitted.<br /><br />Not that the FD would be indulging in the readjustment this time too, but it’s a tough challenge when it comes to cutting down on revenue expenditure. Statistics speak. The salary, pension and interest bills itself eat away a whopping 43.61 per cent of the total revenue expenditure anticipated at Rs 47,238 crore for the financial year 2009-10. The government cannot restrain from paying salary and pension to its staff and interest to creditors.<br /><br />Derailment of schemes<br /><br />Then comes subsidies. The government has promised Rs 4,359.71 crore as subsidies for various sectors including food, transport, power, industries, housing, cooperation, agriculture and others in the 2009-10 budget. Any cut in subsidies would mean derailment of its populist schemes.<br /><br />Most of the remaining balance amount goes to the inevitable expenditure for day-to-day maintenance and administrative expenses which again cannot be done away with. <br />This leads to a situation wherein the government has little elbow room for cost-cutting, sources in the Finance Department pointed out. There cannot be any succour next year as the projections for the next fiscal according State Medium Term Fiscal Plan: 2009-13 indicate a higher chunk (43.95 pc of revenue expenditure) for salaries/interest/ pension and also subsidies (Rs 4,720 crore).<br /><br />The government had recently announced plans to save Rs 1,500 crore under non-plan scheme as part of austerity measures in the wake of the devastating floods in North Karnataka. <br /><br />Demarcation<br /><br />However, plan and non-plan expenditure are itself not well-defined. India is probably the only country to have a plan and non-plan distinction in the budgeting process. The popular conception is that plan expenditure is supposed to indicate development while non-plan expenditure is wasteful. <br /><br />But, in practice there does not appear to be a clear policy for classification of expenditures as plan or non-plan. In fact, the Karnataka State Financial Management and Accountability Study conducted by the World Bank in 2004 has suggested that the state do away with plan and non-plan expenditure budgeting altogether.</p>
<p>It works like this. At the end of each financial year, a substantial amount of budgetary grants remain unutilised in several departments, mainly because of poor or non-implementation of various schemes.<br /><br />For instance in 2008-09, Minor Irrigation Department could utilise only Rs 432 crore out of Rs 528 crore earmarked. A little readjustment of accounts and these funds could be passed off as ‘savings’. <br /><br />It’s a little secret method of cost cutting that the Finance Department (FD) sometimes indulges in, a senior officer in Department admitted.<br /><br />Not that the FD would be indulging in the readjustment this time too, but it’s a tough challenge when it comes to cutting down on revenue expenditure. Statistics speak. The salary, pension and interest bills itself eat away a whopping 43.61 per cent of the total revenue expenditure anticipated at Rs 47,238 crore for the financial year 2009-10. The government cannot restrain from paying salary and pension to its staff and interest to creditors.<br /><br />Derailment of schemes<br /><br />Then comes subsidies. The government has promised Rs 4,359.71 crore as subsidies for various sectors including food, transport, power, industries, housing, cooperation, agriculture and others in the 2009-10 budget. Any cut in subsidies would mean derailment of its populist schemes.<br /><br />Most of the remaining balance amount goes to the inevitable expenditure for day-to-day maintenance and administrative expenses which again cannot be done away with. <br />This leads to a situation wherein the government has little elbow room for cost-cutting, sources in the Finance Department pointed out. There cannot be any succour next year as the projections for the next fiscal according State Medium Term Fiscal Plan: 2009-13 indicate a higher chunk (43.95 pc of revenue expenditure) for salaries/interest/ pension and also subsidies (Rs 4,720 crore).<br /><br />The government had recently announced plans to save Rs 1,500 crore under non-plan scheme as part of austerity measures in the wake of the devastating floods in North Karnataka. <br /><br />Demarcation<br /><br />However, plan and non-plan expenditure are itself not well-defined. India is probably the only country to have a plan and non-plan distinction in the budgeting process. The popular conception is that plan expenditure is supposed to indicate development while non-plan expenditure is wasteful. <br /><br />But, in practice there does not appear to be a clear policy for classification of expenditures as plan or non-plan. In fact, the Karnataka State Financial Management and Accountability Study conducted by the World Bank in 2004 has suggested that the state do away with plan and non-plan expenditure budgeting altogether.</p>