Outcome Budget

 Outcome Budget

Conversion of Financial Outlays into Physical Outcomes

Check the Table (end of the article) for clear examples of the conversion

Backdrop: 

• The existing budget system, although involves proper checks and validations at various levels relies heavily on expenditure figures of previous years which are then incremented as per the revised requirements in the next year. 

• The present system consists of comparison of expenditure incurred viz-a-viz budget estimates/allotment without estimating the final outcome expected to be achieved. 

• The Performance Budget was introduced in the year 1969  following the recommendations of the ARC - Administrative Reforms Commission. 

• For long, a need was felt to address certain weaknesses in the performance budgeting system, such as lack of a clear relationship between the financial and performance budgets and inadequate target setting for the ensuing year. 

• To obviate the above lacunae, the Outcome Budget was introduced in the year 2005-06 in the Ministry of Finance. 

In Indian Railways: 

• Implemented from 2006-07 onwards in Indian Railways and other ministries.

 

• Applicable for all works of Rs. 5 Crores and above

 

• Simply Outcome Budget means  “Converting Financial Outlays into Physical Outcomes”

• Mechanism of “Checks & Balances” 

• It is a Progress Card on what Railways have done with the amount assigned in the previous annual Budget.  

What is: 

 

• Measures estimated outcomes of all Govt projects and checks whether money has been spent for the purpose it was sanctioned or not. 

Method:

•  It is an evolving & dynamic process

• The actual physical performance of the Previous Year, Current Year & targeted performance during the Next Year is analysed.

• Achieved by defining Intermediate & Final Outcomes, Standardising Unit Costs, Capacity building for needed efficiency, ensuring regularisation & adequate flow of funds.

• Reviewing every 3 months, benchmarking, effective monitoring & evaluation, identifying areas where funds to be reallocated. 

Advantages: 

1. Outcome of the Projects - Not only in monetary terms, but also physical outcomes

2. Helps Management to control expenses & introduce discipline in expenditure. 

3. Govt projects become more result oriented

4. Reduce costs by identifying Projects that do not contribute enough outcomes. 

5. Fixing the accountability. 

Examples:

SN	Activity	Financial Outlay	Physical Outcome
1	Earthing of signals to reduce the incidences of failure due to frequent lightning (in nos.)	Rs. 30 Laksh	Substantially reduced rate of signal failure in the section from X to X-A   Enhanced throughput of section in terms of GTKM and NTKM of freight trains,   Increased coach kilometres / Passenger kilometres for passenger(PKM) trains   Saving monetized in Rs …lacs per month
2	Fitment of fuel efficiency kit in diesel locomotives (in nos.)	45 lacs per kit	Improved specific fuel consumption from F to F- A   Saving of HSD oil in liters per month   Saving monetized in Rs …lacs per month
3	Development of Goods shed with state of the art facilities	Rs. 50 lacs	Reduced detention of rake from X to X-A   Enhanced loading in tons   Freight revenue expected to be increased by Rs…. lacs per month
4	Road Over Bridge (ROB)/ Road Under Bridge (RUB) - Removal of LC gates	Rs. 200 lacs	Elimination of accident at LC gates.   Increase in maximum train speed.   Reduction in train detention.   Increase throughput.   Increased GTKM,NTKM &CKM andEnhanced Traffic Earnings   Revenue expected to be increased by Rs ….lacs per month

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