Devolution to states: States get more room

Central assistance sees 184% jump with more direct routing of funds

In keeping with its promise on more fiscal autonomy for states, the National Democratic Alliance (NDA) government has increased the central assistance to state plans three-fold, to Rs 3.38 lakh crore.

This is in continuation of the United Progressive Alliance (UPA) government’s policy of restructuring 126 Centrally Sponsored Schemes (CSS), which include 17 flagship programmes such as Mahatma Gandhi National Rural Employment Guarantee Scheme and National Food Security Mission. The total number of CSS has been reduced to 66 in 2014-15.

As a result, a portion of the plan funds earlier allocated to ministries will be diverted as additional central assistance to states. This also explains the major reduction (33 per cent) in the central plan outlay of ministries in the Budget Estimates of 2014-15 as against the Revised Estimates (RE) for 2013-14.

The Budget support for central plans stood at an estimate of Rs 2.36 lakh crore in 2014-15 as against the RE of Rs 3.56 lakh crore in 2013-14. The central assistance for states and Union Territories plans has gone up from the RE of Rs 1.19 lakh crore in 2013-14 to Rs 3.38 lakh crore in 2014-15, a steep rise by 184 per cent.

For instance, the central plan outlay for the ministry of human resource development was slashed threefold from the RE of Rs 61,862 crore in 2013-14 to Rs 17,672 crore in 2014-15. However, under the state plan outlay, the same ministry has been allocated Rs 50,694 crore in this financial year. Earlier, no funds were allocated to states through the HRD ministry.

The restructuring of CSS was approved by the Union Cabinet under the UPA government in 2013, as recommended by a committee headed by Planning Commission member B K Chaturvedi.

“The intent of the decision is greater synergy in programme implementation and more focused monitoring of implementation by administrative ministries/departments. This will also prevent thin-spreading of resources…This will infuse greater ownership of Plan schemes with the respective state/UT government,” the Budget document noted.

Under non-plan expenditure, the grants given to states and UTs saw a 13.5 per cent increase from the RE of Rs 61,617 crore to Rs 69,936 crore in the current financial year. As compared to this, in 2013-14, the increase was 28 per cent.

The share of various states in tax revenue is up 20 per cent from Rs 3.18 lakh crore (revised estimate) to Rs 3.82 lakh crore in 2014-15, compared to a nine per cent increase in the previous year.

Additionally, a special package of Rs 700 crore was given to Delhi, at present under the President’s Rule, for water and power reforms. “Delhi is plagued by frequent transmission-related problems and issues of water distribution and supply. To overcome this and make Delhi a world-class city, I propose to provide Rs 200 crore for power reforms and Rs 500 crore for water reforms,” Finance Minister Arun Jaitley said.

Andaman and Nicobar Islands were allotted Rs 150 crore to address communication-related problems and Puducherry Rs 188 crore for “meeting commitments for disaster preparedness”.