This zero can unleash big value

Zero-based budgeting! A method of budgeting or a technique that sets all budgets to nil at the beginning of the financial year or a period. It requires government departments to justify all their expenditures, not just those exceeding the budget. Money is allocated to the departments and not just based on previous year’s budget (plus or minus some percentage).

This method is detailed, and provides a comprehensive analysis of objectives and needs. That essentially implies that it is not only a budget, it is also a tool to plan and strategise. But to implement such a detailed and immaculate plan, requires managers to evaluate cost effectiveness of their operations, threadbare. Also, management participation in planning & budgeting is expanded to all levels of the organisation. The Union Government’s first acceptance of Zero-based budgeting was for the Department of Science and Technology through its Memorandum of December 1983. Later in 2006, Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, emphasized that in the 11th Plan, moves must be made to shift towards Zero-based budgeting.

On the negative side, countries following Zero-based budgeting fail to focus on their long term achievements, while focusing too much on short term expenditures. Even the reviews and analysis required to be carried out cannot be handled within the normal cycle of the budget process spread over a few months. But all in all, the need for Zero-based budgeting can hardly be over emphasised in a situation of resource crunch, when demands far outstrip resources.

It is absolutely essential that the government’s resources be conserved, by eliminating wasteful expenditure, removing duplication or multiplication of expenditure and making expenses prudent, most fruitful and efficient. Well, it sounds good but will we implement it?