Federalism and issues of centrally sponsored schemes

It Shows the Issues of Centrally sponsored schemes (CSS) in a Federal System in India

1. Federalism and issues of Centrally Sponsored Schemes ABDUL SAMEER PM

2. Federalism and issues of Centrally Sponsored Schemes Centrally Sponsored Schemes  (CSS) are  schemes that are implemented by state governments of India but are largely funded by the Central Government with a defined State Government share . Centrally sponsored schemes are differ from Central sector scheme under central sector schemes all expenditures are born by the central government but in centrally sponsored scheme CSS it is mainly funded by central government but state government has to bear the rest of the financial burden including a share Examples: MGNREGA, Pradhan Mantri Gram Sadak Yojana etc.

3. Centrally Sponsored Schemes- Origin Centrally sponsored schemes started as a tool by the Centre to assist states in fulfilling their Constitutional responsibilities in areas of national priority like agriculture, health and education. They soon grew in both number and importance, and by 2012, 147 of these schemes accounted for 42% of the Centre’s plan expenditure. Moreover , in some states centrally sponsored schemes became the predominant mode of financing social sector expenditure It has been pointed out that these schemes have grown both in volume and in number over the years in spite of States' objection to their proliferation

4. Issues Related to CSS 1. Needed grass root knowledge: it makes little sense for the Union government to provide goods and services that are best provided by state governments. In sectors such as agriculture, education and health, among others, knowledge of local conditions is important for the success of any scheme or project . Crafting these schemes while sitting in Delhi is of no use . 2. Lack of proper coordination with state governments: estimating the money required for the success of these projects requires a great degree of coordination with state governments. Simply asking for inputs on a file and then allocating money on the basis of unworkable formulae is the best way to sink a scheme

5. 3. At present states are more empowered and there is no need of such schemes : CSS came into being in the late 1960s when India was a weak and underdeveloped economy. State governments did not have the financial resources and the expertise to run ambitious schemes. At that time, there was a rationale to these schemes: matters of national policy such as family planning and resettlement of landless agricultural labourers required the intervention of the Union government. Since then, state governments have acquired a degree of expertise—even if it is wanting in many respects—and have financial resources for what they need to do.

6. 4. The uniform norms and strict  guidelines adversely affect the autonomy of the states and can lead to inefficient overlaps: For instance, in 2010, the government of Bihar launched a number of schemes, including one for uniforms. However , that was the year the Right To Education was launched by the Centre too. This saw a significant influx of money into the Sarva Shiksha Abhiyan . One of the components under this scheme was funding for uniforms for all states. As a result, the Union government increased Bihar’s budget for uniforms under the Sarva Shiksha Abhiyan by a whopping 200%. But by then, Bihar had already spent its own money on uniforms and much of the central allocation was not utilised .

7. 5.Proliferation of such schemes reduce States Fiscal capacity State governments responsible for implementation have had an uneasy relationship with centrally sponsored schemes. States have repeatedly complained that the proliferation of such schemes infringes on their autonomy by reducing their fiscal space as they are expected to co-finance schemes. For instance, under Sarva Shiksha Abhiyan , till 2015, states were expected to contribute 35% of the total approved budget.

8.   6. Uncertainty of funding Allocations to centrally sponsored schemes are very volatile too. The Union Budget allocates funds to schemes, but not to states. Thus , state governments often don’t know in advance either how much money it will get, or even when the money will be released. This causes uncertainty in state finance departments, and at the grassroots

9. 7.Matching contribution requirements adversely affect poor States CSS requires matching contribution from state governments. As a result of this, the economically poorer States, with lower magnitudes of own revenue and consequently lesser ability to provide matching funds for the CSS, have received less Central funds for CSS than they should have on the basis of socio-economic challenges . Moreover , in case of some of the States, a significant chunk of the funds they receive under Central Assistance for State & UT Plans has been used for matching contributions by States for the CSS leaving little resources for State Plan Schemes.

10. 8. CSS are not flexible according to the local requirements Another major criticism of the CSS has been the broad adherence to a ‘one size fits all’ approach in the objectives, financial norms, unit costs and operational guidelines in most such schemes . There have been several instances of States complaining about the limited scope given in the CSS for adapting to locally relevant needs and challenges. As a result of such rigidity in the designs of the CSS, States have faced problems in utilizing funds adequately and the results achieved through these schemes have been less than satisfactory.

11. 9. Unnecessarily Large number of centrally sponsored schemes The other major criticism of the proliferation of CSS has been the large number of schemes that are there to be implemented and the related problem of limited public resources being spread very thin across so many schemes . It has been argued that the implementation of schemes could improve if the total number of thinly financed schemes is brought down significantly and have a few adequately financed schemes.

12. 10.Lack of qualified and efficient staffs for implementation the States are not allowed to use the Central funds (i.e. the Plan funds) for recruiting new staff on regular / permanent cadre; States can use the Salary-related funds in the CSS only for contractual staff who can be laid off easily Growing shortage of qualified staff in the States has constrained their capacity to utilize Central funds in the CSS , the same inability of the States to fully utilize Central funds is then cited as a justification of the low level of budgetary allocations for the development sectors in the country.

13. Thank You