The Recommendations of the High Level Expert Committee on Efficient Management of Public Expenditure

The Planning Commission constituted the High Level Expert Committee (HLEC) on Efficient Management of Public expenditure under the Chairmanship of Dr C.Rangarajan. 

The terms of reference were: 

• to clearly define the scope of public-sector Plan aligning it to changes in design and delivery systems;
• to suggest an action plan for abolition of the Plan and non-Plan distinction; 
• to suggest a comprehensive framework for resource transfer to states; 
• to examine the accountability concerns arising out of direct transfer of funds;
• and to examine revenue and capital expenditure classification on end-use basis.

The HLEC submitted its report in September 2011 and the main recommendations of the Committee are as follows:

1. A fundamental shift in the approach of public expenditure management by removing the Plan-Non Plan distinction and with budgeting linked to outputs and outcomes.
2. Introduction of a new multi-dimensional budget and accounting classification with uniform codes for central programmes, sub programmes and schemes being implemented in the States. The Central Plan Scheme Monitoring System (CPSMS) to be extended and a portal to be set up for the citizens to provide information on flow of resources and their utilization.
3. The switchover to complete treasury mode from 12th Five Year Plan for all new schemes. A suitable accounting methodology to distinguish between final expenditure and transfer to be worked out by the CGA (Controller General of Accounts) and CAG (Comptroller and Auditor General).
4. The annual budgetary component of the Plan of the Centre and States to have one-to-one relation with the Government Budget of the Centre or of a State respectively. All States/UTs to include information about investment outlays of SPSEs (State Public Sector Enterprises) in their budgets as a separate annexure. The resources of the rural and urban local bodies to be included as part of the State/UT Plans.
5. Regular updates on Project-wise, Ministry-wise and Sector-wise information on Public Private Partnerships (PPPs) to be provided in Central and State Budgets as both annuity payments and VGF (Viability Gap Funding) pertaining to PPP projects are provided from the budgetary support.
6. Continuation of the Revenue-Capital classification and introduction of an “adjusted revenue deficit” by adjusting the revenue deficit to the extent of grants for creating assets for better understanding and for compliance in terms of FRBMA. Capital expenditure should relate to the creation of assets and be determined by the ownership criterion.

Source : Economic Survey 2011-2012