15th Finance Commission may cut number of centrally-sponsored schemes

The 15th Finance Commission is likely to recommend eliminating a number of centrally-sponsored schemes, a move that will come as a relief to the Centre and the states and enable them to realise substantial savings from next year.

The schemes that will be pruned or eliminated will be in areas and welfare sectors under the Constitution’s State List, like agriculture, public health, water supply and irrigation, fisheries, and social justice. 

At present, there are 30 centrally-sponsored schemes, but these are umbrella programmes, with many sub-schemes under them. 

Additionally, according to the 2019-20 Budget, India has more than 700 central sector schemes.

Centrally-sponsored schemes have financial participation of both the Centre and states. The ratio of state participation may vary from 50:50, 60:40, 70:30, or 90:10. The Centre transfers money to the states, which have to implement the scheme. This contrasts with central sector schemes, which are completely funded and implemented by New Delhi.

“Many of the schemes, be it centrally-sponsored, or central schemes, have outlived their purpose. The states, too, have asked for some schemes’ elimination,” said an official.

Another official said there had been a growing demand from states to reduce the number of centrally-sponsored schemes, particularly in areas where they (states) had a say. It is expected that if such a decision is made by the Finance Commission in its report, expected on November 30, the Centre and states will support it. 

The Centre, not the Finance Commission, is deciding the evaluation of the schemes and the sub-schemes to be pruned.

A third official said after the Finance Commission told the Centre to evaluate all its schemes, the NITI Aayog had tasked the Development Monitoring and Evaluation Office (DMEU) to do a third-party evaluation of the centrally-sponsored and central sector schemes. “The thinking is that the schemes that are state subjects should be scrapped or abolished,” the official said.

For example, in agriculture there is a broad scheme to deal with climate-resistant farming, but within it there are several components that states can handle.

At the last meeting of the NITI Aayog’s Governing Council in June, several chief ministers, of not only opposition parties but also the Bharatiya Janata Party’s allies like Bihar’s Nitish Kumar, stressed that centrally-sponsored schemes were bleeding states dry, and asked the Centre to turn them into central sector schemes or discontinue them. They also demanded the Centre, given the rural distress because of drought, release its backlog of payment on account of the Mahatma Gandhi National Rural Employment Guarantee Scheme. The National Rural Employment Guarantee Act (NREGA) is a centrally-sponsored scheme.