Introduction:
As a student of public finance and administration, the magnanimity of the numbers involved has always overwhelmed me. Compound such magnanimity with complexity of multilayered (Federal, State, Municipal and Panchayati Raj Institution) aggregation / disaggregation of numbers and we have created a fantastic recipe of confusion and opacity. Due to availability of relatively consistent set of data, Union Budget of India becomes a fair starting point to understand Public Finance and its Administration.
Union Budget is draw up as largely sum of parts. There are 101 parts – Ministries and Departments – reported in Union Budget 2020-21. Ministries and Departments budget their expenditure under various Major heads (total 1581 different) and provide additional level (total 2105 details) of detail of these expenditures. Such large number of heads and details impacts the ability to aggregate / compare data. An argument could be extended that expenditure of each of the ministries / department would be different in nature and hence not comparable / cannot be aggregated. As a purely elementary experiment I identified one of the smallest (INR 13,647 crores) and simplest head of Expenditure in Union Budget - “expenses related to secretariat”. I am capturing few thoughts on this expenditure.
What constitutes Secretariat?
The secretariat of an organization is the department that fulfils its central administrative or general secretary duties. A good secretariat keeps a rolling calendar of meetings, timing for major decisions and work programme activities: this helps to keep everyone organised. Thus each ministry / department ideally would have a secretariat to assist in effective administration. This secretariat function of each ministry and department could be largely compared in terms of work content if not quantum. Thus one can draw some relationships / comparisons between secretariat costs of different Ministries / departments.
Observations:
1. Some apparently disproportional changes to secretarial expenses are tabulated below:
The substantial absolute increase in Department of Expenditure’s and Department of Economic affairs secretariat cost are surely requiring some explanation. Equally interesting is the drastic reduction (INR 555 crores) of Ministry of housing and Urban affairs secretariate budget.
2. The largest secretariat expense is budgeted for Ministry of Defence – INR 4,815 crores against a total expenditure budget of INR 14,500 crores. At 33.21% proportion the secretariat costs seem highly disproportional. Aggregating expenditure of all Defence related Ministries and Departments would make this secretarial expenses seem bit more proportional (about 1% of INR 4.71 lakh crore of expenditure). This would mean that budgetary allocation based on ministry / department would need to be done with more seriousness.
3. Out of the 101 ministries / departments, around 20 didn’t budget for any secretariat costs. Of the total INR 31 lakh crore expenditure budget, these 20 ministries department were responsible for INR 17 lakh crore. Some of these departments based on its nature might not require secretariat eg. “Transfers to states / Union territories” and “Interest Payments”. However departments like Police, Pensions, Railways and Indian Audit & Accounts department have not apparently budgeted for secretariat. Essentially such expenditure would be masked under some other head. These 4 departments are responsible for INR 2.43 lakh crore expenditure. Such large expenditure sure would require dedicated administration teams.
4. There are some departments who have 100% of their expenses in the nature of secretariat – Ministry of Parliamentary Affairs (INR 51 crores) and Department of Investment and Public Asset Management (DIPAM) (INR 132 crores). These expenditures, while relevant, could be undertaken as part of a larger department. If DIPAM is only a secretariat function, what is the rationale for capturing such nominal information under the Union Budget can be examined afresh for sure. It also needs to be examined why a department incharge of public asset management has no line function and only secretariat!!!
Conclusion:
Using Secretariat expenditure is only to broadly establish empirically that there are gaps in the process which can result in substantial inefficiency / wastage of public resources. The larger theme that I would like to highlight:
1. A serious relook at public expenditure bodies and how they fit into larger scheme of public administration needs to done. There are so many ministries with apparent overlap in their objective or area of operation. These overlaps surely create redundancy or conflict which result in deadlock. Examples are (i) Railways and National Highway authority, (ii) innumerable departments and ministries addressing farming, agriculture, food processing, panchayati raj and the ilk and (iii) expenditure of Department of revenue (INR 1.36 lakh crores) , Direct Taxes (INR 8,063 crores) and indirect taxes (INR 8,258 crores).
2. Standardisation of Heads of expenditure is recommended. Detailed Heads can provide more information but major head could be standardised. This would help in collating information like total expenditure on personnel by Government.
3. Today estimating Per capita contribution of any government personnel within the context of contribution to public administration is very difficult if not impossible. Through budgeting process this should be promoted. Eg – India collects approximately INR 20 lakh crore from Direct and Indirect Tax. The cost of Department of Revenue is estimated at 1.5 lakh crores. This would mean Union spends about 7.5% for collection of revenues. But any standard such metrics would be viewed very adversely in commercial organization.
This is my first paper in a series that I intend to write to contribute towards improving our Public Finance and administration in India.
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