Plan, non-Plan distinction may soon be passe

The government will slowly move to scrap Plan and non-Plan expenditure classification in the Budget, and replace it with capital and revenue expenses.

“This will give the right direction in simplification of accounts, and also how we focus on expenditure,” Expenditure Secretary Ratan P Watal said on Tuesday.

The Plan and non-Plan distinction started in the Budget of 1987. Under the plan expenditure comes five-year plans. Non-plan expenditure accommodates subsidies, pensions, grants to states, interest payment, defence capital expenditure, and loans to PSUs, states and Union Territories.

 The setting up of NITI Ayog has laid the foundation of abolition of Plan and non-Plan expenses because much of the expenditure incurred by the government is in the category of non-Plan expenditure, which constitute about 68-70 per cent of the total expenditure.  The distinction has been criticised by various committees like C Rangarajan on the ground that the focus on Plan expenditures reduces the attention on the non-Plan expenditure which involves carious costs.