The Planning Commission has asked all central ministries and departments to shun their “business-as-usual approach” and use resources optimally through a zero-based budgeting model to make the growth process more broad-based and inclusive.
In a missive to central ministries ahead of the preparation of the annual plan for 2008-09, the commission has said the ambitious targets proposed in the 11th Five Year Plan (2007-12) cannot be achieved by a following a “business as usual approach”.
It said concerted efforts were required to shape policies, priorities and objectives for individual sectors and make necessary allocation for critical programmes for using the “available resources in the most judicious and economically efficient manner”.
The panel emphasised the need to adhere to the zero-based budgeting (ZBB) approach and had undertaken an exercise on ZBB with the ministries and departments during April to June.
“It is of utmost importance that the ZBB exercise is fully taken on board. Both the Centre and the states have to make determined and cooperative efforts in these areas,” it said.
In zero-based budgeting, every department function is reviewed comprehensively and all expenditure must be explained, rather than only the increases. It thus ensures that the budget request of each department is justified in complete detail starting from the zero-base. This is in contrast to conventional budgeting that follows an incremental approach and where each department only explains the reason for increases in expenditure over the previous year’s budget.
In zero-based budgeting, every department function is reviewed comprehensively and all expenditure must be explained, rather than only the increases. It thus ensures that the budget request of each department is justified in complete detail starting from the zero-base. This is in contrast to conventional budgeting that follows an incremental approach and where each department only explains the reason for increases in expenditure over the previous year’s budget.
“Every ministry has many schemes and programmes that become redundant. A zero-based budget would ensure that such schemes are scrapped and more suitable ones are developed. However, this does not mean some of the schemes, which are managed across years, would be scrapped,” a senior government official said. The plan panel and the finance ministry have had elaborate discussions on the zero-based budget process with both agreeing that this is ideal approach for a large country like India, the official said.