The Performance Budgeting neglects one important issue. It does not prescribe as to how the funds should be allocated among various programmes and which of these programmes are more important as compared to other programmes in the budget. The technique of Planning – Programming – Budgeting, originally developed by the Rand Corporation in Santa Monica, California rectifies the above mistakes.

The P. P. B. (System) [Planning, Programming, Budgeting (System)] consists of 3 basic elements, namely Planning, Programming and Budgeting. It is also the order of activities through which the budget is prepared. These 3 basic elements consist of the following steps:

  1. Planning. Planning under the PPB requires that the basic goals or objectives of the organisation are defined clearly. Thereafter the selection of programmes is needed to achieve these goals, which forms the next element of PPB.
  2. Programming. Programming involves the development of programme structure which consists of 5 to 10 programme categories with each category bringing together activities with common objectives or common output regardless of the agency location. Thereafter the grouping of expenditure is done according to the purpose which is to be achieved by the expenditure. This grouping of expenditure is an important aspect of PPB (System), (Planning, Programming, Budgeting (System)). Another important feature of PPBs is the existence of multi-layer programme and the financial plan, prepared by each agency, covering usually a period of 5 years into the future, which gives these programmes the shape of a plan. At this stage, the cost-Benefit Analysis is made to compare the alternative ways to achieve the policy goals. The selection of projects is hence made based on this analysis.
  3. Budgeting. This is the final stage of the preparation of PPBs. This translates the goals, programmes and projects into money estimates which are to be presented to the legislature for legislative sanction.

Planning, Programming, Budgeting (SYSTEM)The preparation of PPB has the following benefits :

  1. P.P.B. emphasises long term benefits and costs of the programmes. Hence such programmes and projects which cannot be completed within a year, can be naturally and effectively included in the P. P. B.
  2. By the use of elaborate cost-benefit analysis, P. P. B. S sharpens and clarifies the policy options available to the administrative decision-makers.
  3. P.P.B.S. seeks to encourage administrators and seeks to support thinking along the constructive lines in the administration.
  4. It links the planning process with budgeting in a meaningful manner thereby evolving a coherent and comprehensive programme of action for the Government as a whole.
  5. It promotes efficiency and economy in administration by turning most of the unplanned activities into planned ones and that too planned and prepared 4-5 years in advance.

However, the PPBS suffer from a number of defects. First of all, it is a very complicated system as it requires integration of Planning, Programming and Budgeting. Secondly the preparation of a PPB require highly skilled manpower which can collect the required data and then analyse the data using sophisticated techniques of Maths, Management, etc. This is hence a very expensive process requiring a lot of paper work to be done which puts an undue burden on our eco-system which is already suffering from large-scale deforestation to satisfy human needs. Moreover, the PPBS fail to deliver the goods in situation of extreme urgency and where the targets cannot be physically quantified. It is unsuitable for emergency situations, since it requires a lot of time for formulation and undue emphasis on efficiency is useless in situation where extreme effectiveness is needed. Nevertheless, the PPBS is found to be a successful in areas where there is a great amount of variation of output and the direct costs. There it has been found to be helpful in eliminating significant amount of wastage due to the integration of Planning, Programming and Budgeting.

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