Central schemes rejig will not eliminate Union ministries' role

Experts say it will increase accountability of funds by state governments

The restructuring of centrally sponsored schemes (CSS) in the Union Budget for 2014-15, with the resulting direct transfer of Rs 3.4 lakh crore to the states, is unlikely to eliminate the role of central ministries.

The Budget allocated the money from the annual Plan expenditure, as central assistance to plans of states and Union Territories. This amount is 184 per cent higher than the allocation under the same account in 2013-14 (revised estimate) and 43 per cent more than the general budgetary support for the central plan for 2014-15.

The official explanation for the big rise is the CSS restructuring, under which the number of such programmes have been cut to 83 from the earlier 146, by combining or dropping smaller ones. Beyond this, there has also been a change in the process in which the funds will henceforth be transferred from the Centre to the states.

Former Planning Commission member Abhijit Sen says the fund will be transferred directly to the state treasuries as against the earlier practice of these being transferred to the central ministries and then to the respective state departments and ministries.

"It will be the responsibility of the state treasuries to ensure that funds earmarked for a certain project moves to the societies, implementing agencies and nodal ministries," he told Business Standard.

As the money goes to state treasuries, the state arms of the Comptroller and Auditor General can examine its use. "It will be the state's responsibility to use the fund transferred to the state treasury under the guidelines mentioned in the Central scheme. These are not untied funds. In fact, these are very much tied funds and can only be used for the schemes allocated for, to be monitored by central government officials," Sen said.

Which, he noted, meant officials in the central ministries in charge of these would have a bigger monitoring role.

B K Chaturvedi, former Commission member and one of the main brains behind the CSS restructuring, concurred that the change would not diminish the role of central bureaucrats. The funds would flow directly to state treasuries but in consultation with the central line ministries.

Chaturvedi explained that before the restructuring of CSS, plan funds were transferred to states in three ways. The first was normal central assistance, through the 'Gadgil-Mukherjee' formula. In addition, there is special assistance given mainly to the northeast states and Jammu & Kashmir, and a very small amount to other states. The third was additional central assistance, for schemes such as the Jawaharlal Nehru National Urban Renewal Mission.

A huge sum went to the state governments through CSS but never got reflected in the annual Plan size of each state. After this change, all such funds which were part of the CSS and went to the states will form part of the additional central assistance. So, the state's annual plan and central assistance to state plans in the Union Budget will be much more than the Budget support to the central plan.