NITI Aayog : Centrally Sponsored Schemes (CSS)
As part of the expenditure reforms, the NITI Aayog has initiated a process for revamping of Centrally Sponsored Schemes (CSSs).
(i) Introduction
Centrally Sponsored Schemes (CSS) are one of the key tools employed by the Indian government to drive development in various sectors across the country. They involve a blend of funding and implementation responsibilities shared between the Union and State governments. CSS play a vital role in addressing the developmental needs of diverse regions, especially focusing on sectors like health, education, agriculture, and infrastructure. However, while they are an integral part of India’s federal structure, they also raise concerns about financial autonomy and effective implementation.
(ii) Historical Evolution of Centrally Sponsored Schemes
The concept of CSS dates back to the First Five-Year Plan in 1951, where schemes of national importance were identified and funded by the Union government. Over time, as India’s developmental needs grew, the number of these schemes expanded. The 14th Finance Commission in 2015, with its emphasis on fiscal federalism, restructured the funding mechanism of CSS, giving states greater autonomy in deciding their spending priorities. Yet, centrally driven schemes have continued to dominate India’s developmental framework.
(iii) Rationale Behind Centrally Sponsored Schemes
(i) Addressing Regional Imbalances: One of the primary reasons for the introduction of CSS is to address the regional disparities in development. States vary in their financial and administrative capacities. Centrally Sponsored Schemes provide uniform support to underdeveloped states, ensuring that all regions benefit from national growth policies.
(ii) National Priorities: CSS are designed to target specific sectors critical to national growth. For instance, schemes related to healthcare, such as the Pradhan Mantri Jan Arogya Yojana (PMJAY), or education-related schemes like Samagra Shiksha, are intended to fulfill nationwide goals like health coverage and universal education.
(iii) Resource Pooling and Risk Sharing: CSS help pool resources from both the central and state governments. This shared funding mechanism not only ensures better resource allocation but also spreads financial risk, especially in sectors like disaster management and social welfare.
(iv) Types of Centrally Sponsored Schemes
(i) Core of the Core Schemes: These are the most crucial CSS, focusing on national priorities such as social protection and poverty alleviation. Schemes like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) fall under this category, ensuring direct assistance to the underprivileged.
(ii) Core Schemes: These schemes focus on the welfare of specific sectors, such as agriculture, health, and education. For example, the National Health Mission (NHM) and Pradhan Mantri Fasal Bima Yojana (PMFBY) are part of this category, targeting sector-specific development goals.
(iii) Optional Schemes: States have the flexibility to choose whether to implement these schemes. Such schemes are more discretionary and usually address specific state-level needs that might not be relevant nationwide.
(v) Funding Mechanism of Centrally Sponsored Schemes
The funding mechanism of CSS is based on the principle of cooperative federalism, where the Union government provides a fixed proportion of funds, and the states contribute the remaining share. Typically, in core schemes, the central government contributes 60%, while the states provide 40%. For north-eastern and hilly states, the funding ratio is more favorable, with the Centre contributing 90% and the states only 10%. However, this funding mechanism has been a point of contention for many states, particularly those that face fiscal constraints.
(vi) Challenges Associated with Centrally Sponsored Schemes
(i) One-size-fits-all Approach: Many CSS are designed with a uniform national framework, leaving little room for states to adapt these schemes to their specific needs. This “one-size-fits-all” approach often results in inefficiencies, especially in diverse states with varying socio-economic conditions.
(ii) Delayed Fund Release: States frequently complain about delays in the release of central funds, which hampers the timely implementation of CSS. This delay not only affects the execution of projects but also creates a financial burden for states that have to advance their share.
(iii) Duplication of Efforts: Many CSS overlap with existing state-level schemes, leading to duplication of efforts and wastage of resources. For example, certain social welfare schemes may have similar objectives as state-run programs, which results in confusion and resource misallocation.
(iv) Lack of Accountability: The joint nature of CSS often results in blurred accountability. While the Centre provides the funds, the states are responsible for implementation. In case of failure, each blames the other, leading to poor outcomes for citizens.
(vii) Reforms and Recommendations
(i) Greater State Autonomy: States should be given more flexibility in the design and implementation of CSS. While the Centre can set broad objectives, states should be allowed to customize schemes based on their unique socio-economic needs. This would improve efficiency and ensure better outcomes.
(ii) Performance-based Incentives: Instead of a uniform allocation of funds, CSS could incorporate performance-based funding, where states that achieve certain targets or milestones receive additional funds. This would incentivize states to focus on outcomes rather than mere utilization of funds.
(iii) Strengthening Monitoring Mechanisms: To ensure accountability, robust monitoring mechanisms need to be put in place. Independent third-party audits and real-time tracking of fund utilization and project implementation can help improve transparency.
(iv) Capacity Building at State Level: States, particularly those with limited administrative capacities, require support in terms of training and human resources. The Centre can assist states in building institutional capacity to effectively manage and implement CSS.
(v) Avoiding Duplication: There should be better coordination between state-level schemes and CSS to avoid duplication of efforts. The Centre and states should work collaboratively to streamline overlapping programs, ensuring optimal resource utilization.
(viii) Conclusion
Centrally Sponsored Schemes have been instrumental in shaping India’s development trajectory, particularly in critical areas like health, education, and rural development. While they are essential tools for addressing regional imbalances and national priorities, their implementation poses challenges, particularly in terms of state autonomy, fund delays, and inefficiencies. To optimize their impact, reforms are necessary, focusing on flexibility, performance-based incentives, and better coordination between the Centre and states. By addressing these challenges, CSS can continue to be a powerful instrument for inclusive and sustainable development in India.
