14 December 2014

Planning for a new commission

Sanjeev Sharma
Dec 14 2014

Narendra Modi’s made it clear that the Planning Commission has to go. His predecessor had five years back sought recommendations on shaking up the panel, but these were left unattended. A new institution to replace the plan body is now in the works. There’s receptivity among CMs, with varied degrees of acceptability. What works out and what doesn’t remains to be seen.


Prime Minister Narendra Modi with Home Minister Rajnath Singh, Finance Minister Arun Jaitley and Chief Ministers during a meeting on the revamp of the Planning Commission in New Delhi on December 7.

It was in 2009 that Prime Minister Dr Manmohan Singh had alluded to the Planning Commission having outlived its utility and asked the members to consider changes to make it more relevant.

A year later, recalls Arun Maira, a member of the Planning Commission till recently, recommendations on the changes in the structure, role, functions and resources were given. The then Prime Minister and the then Deputy

Chairman of the Planning Commission, Montek Singh Ahluwalia, sat on these.

Just months into the job, as Narendra Modi stood up to deliver the Independence Day address, he announced his stand: the Planning Commission had to go, a new institution would take its place.

Maira says the changes recommended to Dr Singh are very similar to what Prime Minister Modi is attempting to do now. “It is not as if suddenly a dramatic idea has appeared. We consulted the stakeholders — states, ministries, private and civil society,” he adds. What’s changed is the urgency and firmness to get on with things. 

Maira, who headed the Boston Consulting Group (BCG) in India, reveals that in 2012, a Parliamentary Standing Committee also gave a report which said that it was time for an independent evaluation of the functioning of the Planning Commission. “Ahluwalia did not respond adequately to the Committee's report. The government was told what needed to be done, but did not respond.”

On August 13, the Union Cabinet approved the repeal of the Cabinet resolution dated March 15, 1950 by which the Planning Commission was set up. It also authorised the Prime Minister to finalise the contours of the new institution to replace it. For now though, status quo prevails and things will go on as they were in this financial year till a new arrangement comes into place.

The country’s apex institution for economic policy-making, fund allocation and running the Five Year Plans was set up by Prime Minister Jawaharlal Nehru in 1950, with him as the ex-officio chairman.

Trying to dispel doubts about any intention to concentrate power in the Centre or giving a raw deal to states, Prime Minister Modi during consultations with Chief Ministers recently outlined his vision for the new body and recalled how the idea for change had germinated two decades back. The first introspection, he told them, was done after the launch of economic reforms in 1992.

As he recalled his not-so-pleasant experience in dealing with the Planning Commission as the Gujarat Chief Minister, and how he always felt the need for a better platform to articulate the views of states, Modi’s pitch did found resonance. Coming down to Yojana Bhavan for grants and being lectured was often a sore point for Chief Ministers with popular mandates.

“It is impossible for the nation to develop unless states develop. The process of policy planning also has to change from ‘top to bottom’ to ‘bottom to top’,” Modi elaborated, pointing out how more say for states and recognising that the government was no longer at the centre of economic activity were at the core of his decision. 

“In countries such as USA, think tanks that function independently of the government have a major role in policy-making. In India, too, there is a great deal of economic activity that happens outside the government setup, and there is a need to design policies for them as well,” Modi said. States, he stressed, should have a key role in the new body with an effective mechanism to address inter-state disputes.

But what exactly does the Prime Minister have in mind?

He’s described “Team India” as a combination of three “teams” — the Prime Minister and Chief Ministers; the Union Council of Ministers; and the bureaucracy in the Centre and states. 

The meeting saw most Chief Ministers favouring restructuring of the Planning Commission, but there was no consensus on disbanding the existing setup.

The government is looking at a structure which will have the Prime Minister, some Cabinet ministers and some Chief Ministers along with technocrats and experts in various fields. The Chief Ministers could be included in the body on a rotation basis and the states could be given liberty to spend funds according to their needs.

Finance Minister Arun Jaitley said no timeline had been fixed and the Centre will take a “considered view after consultations are over”. At the meeting, the Congress-ruled states supported the idea of revamping the Planning Commission, but did not want it to be scrapped as they felt it could be “evolved”.

While some NDA states and those ruled by parties like AIADMK and TRS wanted immediate disbanding of the Planning Commission, Uttar Pradesh Chief Minister Akhilesh Yadav said the new entity should be a transparent and impartial mechanism which would focus on the basic elements of socialism.

Punjab Chief Minister Parkash Singh Badal called for a recast of the Constitution to give the country a genuinely federal structure. He wanted the formula for distribution of resources between the Centre and the states to be drastically reversed. “The states must get 50 per cent share of the central taxes and non-tax revenue, instead of the present 32 per cent, and these funds should be given in an untied manner, without prior conditionalities,” he said.

Badal called for the distribution among states to be based on a transparent formula in an untied manner “instead of through political discretion under which larger states walk away with all the funds”. 

At present, the share of untied grants to states constitutes only 15 per cent of the plan funds and the remaining 85 per cent are determined by the Centre. “These should be completely reversed, with the states getting 85 per cent as untied funds,” Badal said. Former Planning Commission member Arun Maira, meanwhile, lists the four broad recommendations given in 2010. Relationship between the Centre and states, he says, has to be different. “Not states coming every year and being given a lecture on what to do. The body has to look at how the two can work together and installation of new processes.”

Second, ministries often work in a silo mode while issues and problems run across departments. “The new body has to work towards forging a coalition of ministries.”

Third, the new body has to stitch a network of thinking organisations to find answers to the country’s problems. And fourth, with states becoming independent and the private sector increasing its footprint, civil society is more relevant and there is a need to create collaborations.

All this would require staff with new capabilities and expertise to work with people outside. “Then what do you do with the existing people? The idea was to create a lean organisation and see how to accommodate the existing personnel. The Prime Minister has something of this structure in mind, but may not want to create a new body with the old inertia. First determine the processes and functions and then look for capabilities and resources, not the other way round,” says Maira.

Noted economist YK Alagh, a former member of the Planning Commission and at present Chancellor of Central University of Gujarat, feels that the Planning Commission could be replaced by a more focused body concentrating on issues like energy, water and demographics.

These issues, he says, have long-term perspectives, as in China where the state planning committee was replaced by the National Economic and Social Development Commission.

Alagh, who participated in a meeting of experts called by the Planning Commission in August on the new role for the body, says there is some agreement on long-term planning required in some crucial sectors, while there is a difference of opinion on whether the body should allocate resources.

“If the Planning Commission is to be dissolved, first we have to look for its alternative after due discussion,” he stresses. “Resource allocation is an important function of the Planning

Commission and states are already asking the Centre for their plan budgets as they are in the process of designing budgets for the next financial year,” he says.

The main problem, he points out, is grants under Section 382. “Who will administer that function? Some say that the Finance Commission can do it but for that, the Constitution will have to be amended, which will be a tall order for the government.”

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