The Planning Commission recently announced that financial allocations to ministries in 2011-2012 will be based on their performance. An Indian Express article entiled “More for ministries that did well” reports that fund allocations will be made following a performance review of each ministry by the Cabinet Secretariat. But how exactly is ministerial performance going to be measured?  Since 2009, under a directive from the Prime Minister’s Office, central government departments have been implementing a new “Performance Monitoring and Evaluation System” (PMES). At the heart of the PMES is a relatively simple concept – “what gets measured, gets managed”. It marks a shift away from traditional practices of measuring expenditures as outcomes to a more rigorous system of evaluating the performance of government departments. Steered by the Cabinet Secretariat’s Performance Management Division, the PMES is designed to help government departments define, measure and monitor their progress against defined targets and indicators.

How does it work?
At the beginning of each year (1 April), government departments have to develop a Results Framework Document (RFD) which is essentially a performance agreement signed between a Minister and the Secretary of a particular department. In the RFD, departments have to address three basic questions: i) what are the main objectives of the department for the year? ii) what actions are necessary to achieve these objectives and finally iii) what are the success indicators necessary to evaluate these actions. The matrix that results from this exercise is locked into an online MIS system which is then tracked through the year. The department’s progress against these set targets is first reviewed after 6 months and finally evaluated at the end of the year (31 March). Till date, 62 line ministries have signed up to the RFD and their RFDs can already be accessed online. Under discussion is also a controversial proposal to link 40% of a Secretary’s salary to the department’s performance. If implemented this would introduce a system of performance based pay never before seen in the history of Indian administration. Since the program was launched each central government department has been evaluated twice.

Linking Fund Allocations to Performance

The Planning Commission’s decision to link ministerial performance under the RFD to fund allocations is an interesting move. It has been reported that ministries that have failed to meet their RFD targets will receive lower fiscal allocations with greater funds being channeled towards ministries that have been meeting their targets. The focus is clearly on efficiency in fund utilisation. With large sums of money earmarked for implementation of the RTE and MGNREGA and potentially the Right to Food (if the bill is passed) it will be interesting to see how this new results and performance based system will pan out.

Mandakini Devasher Surie is a Research Analyst with the Accountability Initiative.