 "India Budget")
The finance ministry has directed all government departments and ministries to rationalise centrally sponsored and central sector schemes to improve efficiency and merge overlapping schemes.
The exercise is to be completed by March, a senior government official told Business Standard.
“The expenditure department (under the Ministry of Finance) wants to rationalise central sector and centrally sponsored schemes. Similar schemes, or those not achieving the desired outcomes, should be discontinued or merged wherever possible. Currently, there are a large number of schemes. Rationalisation will help in better monitoring,” the official said. Government departments and ministries will submit their recommendations, with the final decision resting with the expenditure department.
“Several schemes are up for appraisal for the next financial year. The exercise has to be completed before that,” the official added. The Union Budget 2026-27 is expected to be presented on February 1.
Centrally sponsored schemes are implemented by the states, with expenditure shared between the central and state governments in a predefined ratio.
Examples include the Pradhan Mantri Gram Sadak Yojana, Swachh Bharat Mission, and National Rural Drinking Water Mission.
Central sector schemes, on the other hand, are entirely funded and implemented by the Centre.
They include food and fertiliser subsidies, economic and social sector allocations, and schemes run by various ministries such as the Fasal Bima Yojana, Duty Drawback Scheme, Janaushadhi Pariyojana, Pradhan Mantri Garib Kalyan Yojana, and Remission of Duties and Taxes on Exported Products.
Currently, there are 54 centrally sponsored schemes and 260 central sector schemes with approval valid until March 31, 2026, which are likely to be submitted for reappraisal, according to the expenditure department. The rationalisation and consolidation exercise was first initiated five years ago by then-finance secretary T V Somanathan, now the Cabinet secretary. Earlier this year, the finance ministry requested that all ministries and departments provide additional details for schemes ending by March 31, 2026, as well as those proposed to continue. The requested information included comments on third-party evaluations, year-wise allocations for the next five years, and details of any components being dropped or modified, with justification.
For centrally sponsored schemes, ministries were asked to provide the funding ratio between the Centre and states and any changes in cost norms. Ministries were also reminded to account for the sunset clause applicable to every scheme and provide information on interventions planned to comply with it.
Departments have submitted details of all posts created for existing schemes — both contractual and regular — including the number of personnel and financial implications, as well as proposed additional posts and associated funding requirements. They also provided a diagrammatic representation of each scheme’s implementation structure, showing all entities involved in fund flow down to the lowest field level and the final beneficiary.
“This Budget will have a different structure. We have already seen the restructuring of the Mahatma Gandhi National Rural Employment Guarantee Scheme. Several other schemes, such as rural housing, may be approaching saturation. In this context, restructuring centrally sponsored and central sector schemes is extremely important,” said N R Bhanumurthy, director, Madras School of Economics.
The Fifteenth Finance Commission cycle will end on March 31, 2026. Schemes ending by then and proposed for continuation in the next cycle will undergo appraisal and approval based on outcome reviews.
