It has been mentioned earlier in the text that Part I of the Budget estimates prepared in India under the Traditional Line - Item System of Budgeting requires no fresh justification since the expenditure under this part is of repetitive nature and has acquired legislative sanction in the past. As a result, often expenditures which have become unproductive with the passage of time keep multiplying and they get granted year after year by the legislature. However, when one starts with Zero as a base, assuming that nothing is available to the administration for computing the extent of expenditure, the estimation of the budget requires item-by-item analysis of the previous year’s budget and it involves giving justification for the continuance of the expenditure under each and every head of the Part I, Part IIA and Part MB of the budget. As a result, the heads of expenditure that have become outdated and are currently unproductive are detected and eliminated from the budget resulting in a significant amount of savings. Since all the competing claims for fresh activities as well as existing activities are examined in the same detailed manner while including in the budget, the budget rejects the priority position of various programmes. This provides operational flexibility to the budget as well as lesser interference from the political executives and other outside agencies at the time of budget execution.
Advantages of the Zero Based Budget
- Zero Based Budget involves programme managers down the line in the identification of the objectives of the programmes and hence what targets so they expect to be set up. It is hence more democratic in nature as compared to other budgetary techniques.
- Since it involves fresh justification for all the activities of the department, it provides useful information to the high level executives not only about the budget matters but also about what has been going on in the various decision-making units.
- Such elaborate information about the programme targets, as is usually provided in the Zero Based Budget, is helpful for evaluating effectiveness of the administration while emphasising efficiency in administration.
- The Zero Based Budget resembles Planning, Programming, Budgeting System and Performance Budgeting in one respect, which is very important for today i. e. Zero Based Budget sets out to show not just on what the Government is spending its money, but what it is spending for.
- It facilitates control of overhead costs by systematically eliminating them year after year.
- Priorities among the activities are better pin-pointed in case of the Zero Based Budget and hence a ranking sheet can be easily prepared, which, when need arises, can serve as a guide to the future contingency plans at the time of budget execution.
- Zero Based Budget, due to the fact that it integrates, planning, budgeting and decision-making, simplifies the entire management/administrative system.
The overall advantage of the Zero Based Budgeting is that it sharpens the analytical skills of the administrators. Since the Zero Based Budgeting involves the Managers (or Administrators) at all the levels of the administration, an added advantage accrues in the form of Management Development (or Administrative Development).
Problems and/or Defects in the System of Zero Based Budgeting
- The Zero Based Budgeting is very complicated and requires a lot of analysis to arrive at the budget estimates. It leads to increase cost and a significant increase in the volume of paperwork. However, the cost of paperwork can be minimised by having an efficient O&M System and by having sophisticated computers etc. But the use of computers and the equipment associated with information technology requires heavy investments which the governments of the poor countries cannot afford to make.
- One factor that adds to the cost of Zero Based Budgeting is the creation of a separate agency for doing zero base budget analysis as this exercise cannot be carried out by the regular government departments because of the complicated nature of Zero Based Budgeting.
- Zero Based Budgeting is better suited for activities where a cost benefit relationship can be established. Indiscriminate application of the Zero Based Budgeting technique to all the operations of the organisation leads to unnecessary paper work with only very little gains. The application of Z.B.B. hence should be avoided for direct application on labour, material and overheads associated with production operations. A number of activities of the government are not amenable to quantification as well as unit-costs are not available. Due to the absence of proper cost accounting, it is difficult to prepare a zero based budget.
- Zero Based Budget is often not applied on the revenue side. At times, it is found that a number of the revenue measures may not be cost effective in themselves and hence their continuance year after year puts extra burden on administration.
The application of Z.B.B. technique may sometimes have excellent economic results; but it may have disastrous social implications. For example, often as a result of Z.B.B., some of the staff members are declared as surplus. A question, therefore, arises as to what should be done in such a case. In Maharashtra, for example, when Z.B.B. was applied for the first time, about 15, 000 people were found to be needlessly employed. Due to serious political and social implications, those staff members could not be retrenched and the redundancy continues even today. However, this situation of surplus manpower is not peculiar to Maharashtra alone. It is to be found that every government department in India is heavily overstaffed. Now continuing with such redundancy of staff, after the redundancy has been identified through Z. B. B. defeats the very purpose of conducting the Z. B. B. Moreover, identifying a person as a surplus labour has adverse effects on the morale and motivation of the person. Though Government has offered to train the surplus staff in other areas of administration and then employ them, resistance to such plans of the Government continues for various reasons. Firstly, the large population of the country feels that giving training and re-employing the persons who are identified as surplus would result in stoppage of employment generation which would result in the unemployment level rising very rapidly in the country. Secondly, what is feared more is that the advent of computerisation and the application of Z. B. B. will lead to ultimate retrenchment of the workforce to the maximum.There are some other practical difficulties in the application of Z. B. B. For example, the plan of the Government to organise Z. B. B. once in every five years was originally there. However, due to the immense work load on the Government departments (a large portion of which is preparing reports and correspondence) it is not possible to cover all the government departments once in 5 years too. Secondly, in a country like India, where the average literacy level and intelligence level of some of the legislators is so low that for them a line-item budget is ultimately needed to push the budget through for legislative sanction. The departments are hence required to make double budgeting exercises, one using Zero Base Technique and the other using the conventional methods.
Though, there are certain shortcomings with Z. B. B., the Z. B. B. is found to be highly successfully in areas where the technological and procedural changes are very fast. For example, it can be of great help to an organisation making electronic equipment, computers, software etc., but its practical utility in the departments like police department is quite doubtful.
Applicability of Zero Based Budgeting in India
In addition to the shortcomings of Z. B. B. cited above, there are some special conditions prevailing in India which may prove to be an obstacle towards the introduction of Z. B. B. in India:
- Z. B. B. is a very sophisticated technique requiring special training or the personnel in order to enable them to prepare a Zero Based Budget. The administrators in India are, however, generalists and due to the frequent inter- departmental transfers, they are ill suited for the preparation of a Zero Based Budget.
- Indian administration and managerial system is already clogged with paperwork. Z. B. B. will add additional amounts of paperwork in the administration.
- The Government of India performs a large set of duties and hence the overall volume of work of the Government is enormous. While Z. B. B. should be at least done once in two years, the Government of India is unable to perform it even once in five years.
- The political atmosphere of the country is highly vitiated, where the religion and caste are openly exploited by the political parties in power alongwith the adoption of the populist polices by the Government. Hence it is very much doubtful that anything that leads to the displeasure of some sections of the population will be honestly applied.
Hence the politicians have chosen to adopt a go-slow policy. However, there seem to be some compelling reasons for the adoption of the Z. B. B. in India. These are :
- Productivity of Indian economy is abysmally low. In view of factors like the presence of a large surplus staff in Government, the comparatively faster growing Non-plan expenditure despite ad-hoc cuts imposed by the Government from time to time, it seems that the country requires Z. B. B. urgently.
- There is lack of incentive for curtailing discretionary expenditure in government and hence for promoting cost economy; the regime of sheltered markets for governmental products has been prevailing in India. All this has resulted in increasing inefficiency in administration. Hence there is no alternative but to adopt Z. B. B.
- All the governmental projects in India are marred by the problem of time - overruns and project cost overruns. Therefore Zero Based Budgeting is needed to avoid wastage of time and resources and to have a strict control on government expenditure.
- India is progressing very fast and the government is entering high-tech areas on an increasing scale. Even the traditional areas of administration are embracing the latest technology on a large scale. Hence there is need for identifying the expenditure on outdated facilities and unused equipment.
Therefore, it appears that the stage is ready for the adoption of the Z. B. B. (Z. B. B. was adopted in some of the Departments of the Government in 1987 but so far it has not been extended to cover all the Governmental departments) on a mass scale in all the governmental departments; but a few precautions need to be undertaken when Z. B. B. is adopted. It should be kept in mind that Z. B. B. is only means for effecting economy and effectiveness in administration. However, with too much emphasis on Z. B. B., there is an inherent danger of Z. B. B. becoming an end itself rather than the means to an end. At the same time, the support of the political masters and the administrators in the top executive positions is highly desirable to overcome the resistance of the public and the personnel in various department and to save it from premature death. Hence a highly motivated staff with a flair for innovation have to be handpicked for Z. B. B. formulation and review.
In PUBLIC ADMINISTRATION
0 comments:
Post a Comment