Introduction:

1. Introduction: • Objectives of Budgets: • Administer business • Helps decision making in the businesses and governments • Put a ceiling on expenditures, control cost of business • Provide linkage between Government's mission and the expenses • Prioritize Government’s expenses to meet new demands, expectations, in context of utilizing scarce resources

2. Evolution of Zero Base Budgeting:

3. What is Zero Base Budgeting: • ZBB introduces Management by Objectives through Financial Management • Each year, budget starts from scratch (hence zero base) - without considering earlier year’s resource allocation. • Systematic application of marginal analysis techniques: Evaluate current and new programs on the basis of Output, performance, costs, utility, effectiveness, relevance, level, scarce resources and priorities • Redefine resource allocation for activities: - Eliminate - Fund at reduced level - Fund at similar level - Fund higher level • This helps to free up resources for new programs.

4. Planning & Budgeting Aspects: Planning Zero Base Budgeting EvaluationOperational Plan - Determination of - Identification & Evaluation -Trade off -Operational Goals/Policies/ of all activities between plan Objectives -Alternatives & Costs to goals, plans achieve plan aims & costs -Establishment of priorities PLANNING BUDGET REVIEW

5. Need for ZBB: It helps in allocating budgetary on more budgetary and allocating resources basis as below: • How effectively and efficiently money is being spent? • How much should be spent? How should be budget reduced? • How should productivity and profitability may be increased? • How effective and efficient are the current operations? • Should current operations be reduced to fund higher priority items in progress? • Flow of information to the top management for allocation of resources?

6. Benefits of ZBB: • Cuts budget more rationally. Efficiency & profitability improved • Provides coherency n better coordination between planning and budgeting • Better insight into detailed working of organization • Better evaluation of subordinate managers by top management • Remove duplication/multiplication of expenditure • Manage overheads better • Enable the top management to reallocate resources with greater flexibility • Enable better coordination between different departments of an organization • Provides a tremendously effective information systems • Enable managerial analysis at all levels

7. Limitations of ZBB: • High costs • More information requirements • Takes up more time than traditional budgeting • Attitudinal resistance from unions/Bureaucrats/Operational people, Lack of orientation/skills of prioritization • New innovative decision packages are to be conceived, evaluated and compared which is difficult task • Multi-level decision making procedures are required; this is difficult • Information data retrieval is not necessary

8. Implementation of ZBB: • Government of Maharashtra introduced ZBB on 16th December,1986 in each department to "get more out of every rupee spent”. • Implementation of ZBB was primarily internalized by each administrative department. • Savings effected by a department were not to be transferred to other departments but would be given to the same department to be spent in the priority areas. • Steps used for effective productivity & efficiency: - Identify ways for cost-effective functioning - Review age old procedures - Delegate administrative/ financial work - Identify areas of cost recovery - Additional resource mobilization - Identifying items of work, which can be outsourced.

9. Results/ Major Achievements of ZBB implementation: • Additional resource mobilization, simplification of procedures • Replacement of legislative enactments • Revision of fees matching the cost of service • Computerization • Identification of surplus manpower • Review staff norms • Review of schemes causing savings

10. Applications of Zero Based Budgeting: Government • This is service sector, where overheads assume alarming figures, ZBB can control this up to large extent • Unique example of Georgia Government over all its 65 paid agencies • In India, Circulation to state governments in India by Ministry of Finance. Industries • Applicable to all operations, administrative techniques and business enterprises. • Prioritization and justification to all capital expenditures programme, cost reduction programmes, research development etc.

11. Approach of Maharashtra Government Progress and Constraints: Based on following cardinal management tenets: • MBO through Financial Management • Involvement of top management • The principal of ‘Plural Executive’ in Administration • ZBB application to total Governmental

12. Zero Based Budgeting in India: • ZBB was first implemented in 1979 when the government considered its rigorous examination of its expenses. • In 1986 a order was issued by the secretary, government of India that ZBB be applied for all its planned and non planned expenditures including PSU’s.

13. Issues faced, while implementation of ZBB: • Defining of the objectives of the govt. • The issue of the centralization and the decentralization of power. • Government operations being ‘precedent’ oriented not creativity oriented. • The MIS in the govt. is not well organized for ZBB implementation. • Difficult of implementation in an ongoing scheme. • It also leads to the problem of retrenchment. • The ‘play safe approach’ & the resistance to change. • ZBB has to be implemented in entirety and not piecemeal.