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State Budget Process

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The state govt. starts the budget process with the discussion with the Finance dept and the revenue earning dept. like sales tax, excise, motor vehicle, registration fee etc, to arrive at the quantum of the state revenue.

Planning Dept. starts discussions with depts. To finalize Plan size,   scheme wise and district wise, sometime in September before taking it to the planning commission for discussing the Plan size.

Formulation of State Budget for any year starts with a discussion between Planning commission and State governments for  some time in September/October for this discussion Planning Commission send a letter to prepare their Plan proposals in 12 to 14 formats dealing with items like:

  • Centrally sponsored Schemes (Sharing pattern between GOI and State where the State share between 20% to 50%)
  • Central Schemes (100% funded By GOI)
  • On-going Schemes
  • New Schemes
  • External Aided projects
  • District Plans
  • Gender
  • SCP
  • TSP and Etc,

To decide the size of the Plan the Planning commission asks the State govt. to project their own resources

The own resources of the State are the State taxes and fees (Moto Vehicle Tax sales tax, now renamed as VATT, Stamps and registration, land Revenue, Water SES etc,.). In addition to their own revenue the resources of the State would also include

1  Central Assistance  given under Gadgil Mkharjee formula (500 CR)which gives 60% weight- age  for total l population of the State, 25% for Per capita Income, 7.5% for performance in achieving National objectives like Population control (1%), literacy rate(1%) Impementation of land reforms (0.5%), etc.    And the balance 7.5% for Special problems of the state given at the discretion of the Planning Commission .

2  Share in central taxes (18,00Cr), as indicated by the finance Commission for every five years period.

3  Additional central Assistance for specific schemes like AIBP (18,00), RKVY, JANNURM(1500), article 275 grants for STs (Rs. 70 CR for AP )

4  Loans from public through Market borrowing, small savings, Provident Fund etc.

The budget consists of   non –plan (continuing schemes) and Plan (new schemes).The Planning Commission would only approve the size of the Annual plan. With out the this approval the GOI, contribution to the resources of the State in the form of   share in central taxes, Central Assistance under Gadgil Mukharjee  formula, Additional Central Assistance, in the form of some flagship programs like AIBP, JNNURM will not be released to the State govts. Hence the importance of Planning commission in the preparation of the State budget. After the Plan size is   discussed between the officers of the Planning commission and the State Finance dept and the planning dept. the final decision will be taken in a discussion between eh vice Chairman Planning commission and the chief Minister of the State. This will be followed by working group discussion between the Planning commission and the State officers to decide on the scheme-wise, dept wise allocations of the Plan.

National Development Council (NDC) met 56 times since its inception, it discusses approach to five year plans, midterm review of the five year plans and specific subjects.   It does not approve annual plan


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