Finance ministry asks states to follow J&K's Budget format for smoother fund allocation

Jammu: Finance ministry today asked all states to adopt the financial accounting model of Jammu and Kashmir and shift to accounting of expenditure under the revenue and capital heads instead of plan and non-plan heads. “The new budgetary format and classification rolled out by Jammu and Kashmir government earlier this year is being emulated by all the states in the country,” an official spokesman said.[caption id=“attachment_2522936” align=“alignleft” width=“380”]  New Budget formula for states. Reuters[/caption] Taking a cue from the Jammu and Kashmir government, the Union finance ministry has asked the states to shift to accounting of expenditure under revenue and capital heads instead of plan and non-plan heads, he added. In a pre-Budget meeting with state finance secretaries in New Delhi on Wednesday, Union finance secretary Ratan Watal said the finance ministry has already started discussions on the subject as the change in classification will help in better public expenditure management. The path-breaking budgetary initiatives presented by the state’s Finance Minister Haseeb Drabu in his maiden Budget speech in the state legislature in March 2015, pioneered the concept of abolishing the system of plan and non-plan expenditure in the state. “Plan and non-plan classification made it impossible to find out where the money has been spent and the new classification would now make it easier,” he had said in his Budget speech. “I have completely changed framework of the state Budget. Starting from the next fiscal (2015-16), our Budget will now have only two parts: receipts and expenditure. “The entire old classification of plan and non-plan has been discarded to effectively monitor public expenditure,” Drabu had said, adding that the new system is so formidable that the large number of government servants, who would have to wait for months together to get their salaries under plan head, will not have to wait any longer. According to Drabu, the new method of fund allocation would provide details of the physical assets created on the ground by the money allocated and spent by various departments of the state government. “Another advantage of this new system is to link sources of revenue to expenditure types thereby making diversion of funds difficult,” he said. He added that the Rajasthan government has already deputed a team of senior officers to study the J&K model of financial restructuring so that the same could be replicated there. In 2011, an expert committee headed by C Rangarajan had first proposed removing the distinction between plan and non-plan expenditure for both the Centre and states. Also, the Expenditure Management Commission, headed by former RBI governor Bimal Jalan, recently suggested that all expenditures be classified as revenue and capital. The state cabinet has already approved Drabu’s another idea of advancing the Budget proposals for 2016-17 to ensure timely spending of resources. PTI