Centrally Sponsored Schemes (CSS)

Why in the News?

NITI Aayog is revamping Centrally Sponsored Schemes (CSSs) as part of its expenditure reforms. The Development Monitoring and Evaluation Office (DMEO) has invited proposals for consultancy support to evaluate these schemes across nine broad sectors.

Key Developments

• The evaluation will cover sectors such as:
• Agriculture and Allied Sector
• Women and Child Development
• Education, Urban Transformation & Skill Development
• Rural Development
• Drinking Water and Sanitation
• Health Sector
• Water Resources, Environment and Forest
• Social Inclusion, Law & Order, and Justice Delivery

About Centrally Sponsored Schemes

Definition

Centrally Sponsored Schemes are initiatives funded jointly by the central and state governments, implemented at the state level within sectors defined in the State and Concurrent Lists of the Constitution.

Features

• Framework: The current framework is based on the 2015 report by the Sub-Group of Chief Ministers on the Rationalisation of CSSs.
• Focus: CSSs aim to align with the National Development Agenda, facilitating collaboration between the Centre and states to realize Vision 2022.
• Current Status: There are currently 75 CSSs divided into three categories, constituting approximately 10.4% of the Centre’s budget expenditure.

Funding

• Transfers for CSSs are routed through the Consolidated Fund of the State.
• Following the 14th Finance Commission recommendations and the abolition of the Plan-Non Plan distinction in 2017, CSSs and Central Sector Schemes have become the main channels for specific-purpose transfers from the Union to the states.
• Funding Patterns:
• North Eastern and Himalayan States: Centre

ratio is 90:10.

• Other States: Centre

ratio is 60:40.

• Union Territories (without Legislature): 100% funded by the Centre.

Monitoring

NITI Aayog has concurrent jurisdiction in monitoring CSSs and oversees third-party evaluations to ensure accountability and effectiveness.

Rationale of Centrally Sponsored Schemes (CSSs)

• Principle of Subsidiarity:
• Central authorities should focus on tasks that cannot be effectively managed at local levels, promoting local governance and decision-making.
• Equalization of Basic Services:
• CSSs aim to provide equal access to essential services, such as healthcare, across different states, ensuring that all citizens benefit from national programs.
• Prioritizing Merit Goods:
• CSSs target goods and services, like subsidized housing and healthcare, that significantly benefit the poor and thus warrant government support.
• Directive Principles of State Policy:
• The schemes align with constitutional principles aimed at reducing inequality (Article 38), improving education (Article 45), supporting weaker sections (Article 46), and enhancing public health (Article 47).

Issues Associated with Current Framework of CSSs

• Resource Distribution Issues:
• A disproportionate amount of funding is concentrated in a few schemes, with 15 schemes accounting for over 91% of total expenditure. This leads to many sub-schemes receiving inadequate funding, such as the Rainfed Area Development sub-scheme with ₹180 crore compared to ₹34 crore for Agro-Forestry.
• Large Number of Schemes:
• The existence of numerous small schemes and sub-components leads to duplication of efforts and a dilution of resources, making it difficult to achieve significant impact.
• Reduced Fiscal Space for Union Items:
• Increased expenditure on state items constrains fiscal space for priorities within the Union List, impacting crucial areas like defense.
• ‘One Size Fits All’ Approach:
• CSSs are often designed by the Union Ministry without accommodating the diverse needs of different states, limiting their effectiveness.
• Lower Absorption Capacity:
• States with lower Gross State Domestic Product (GSDP) struggle to match contributions and absorb funds due to inadequate capacity in manpower and governance, leading to missed opportunities for investment.
• Suboptimal Monitoring:
• Current monitoring focuses more on processes rather than outcomes, emphasizing inputs over actual results, which can hinder effective evaluation of the schemes.

Way Forward

• Prioritizing Funding:
• Gradually phase out funding for CSSs and their subcomponents that are outdated or have minimal budget allocations that do not reflect national priorities.
• Threshold Level for New CSSs:
• As per the Arvind Varma Committee recommendations, new CSSs should only be introduced if the annual outlay exceeds ₹300 crore. For existing smaller schemes, funds should be transferred to states as Normal Central Assistance.
• Inflation-Indexed Funding:
• Financial norms for components like cooking costs in midday meal schemes should be linked to the wholesale price index, with adjustments made every two years to keep pace with inflation.

Conclusion

While CSSs play a crucial role in addressing developmental challenges in India, there are significant issues in their current framework. A strategic approach that prioritizes funding, sets clear thresholds for new schemes, and links financial norms to inflation can enhance the effectiveness and efficiency of these initiatives, ultimately leading to better service delivery and outcomes for citizens.