All ministries, departments to review central schemes by July end

The finance ministry has directed all government departments and ministries to re-evaluate and redesign the ongoing centrally sponsored schemes (CSS) and central sector schemes for the next five years, and submit their proposals by July 31. The move includes evaluating the budgetary allocation for each scheme and phasing out various elements of schemes that may have become redundant.

“The finance ministry has informed us that every ministry has to take fresh approval for the next five years (2021-26). Every scheme would need approval based on the recommendations of the new finance commission report,” said a senior government official. “For this, we are getting all the schemes evaluated by a third party; we’ll then seek the expenditure department’s approval regarding the same. Each and every scheme pertaining to each and every ministry is being evaluated. For instance, some components of certain schemes may have become redundant and so such schemes will be redesigned,” the official said.

Earlier, the finance ministry had said that the Centre would rationalise 131 centrally sponsored schemes, based on the recommendations of the 15th Finance Commission (FFC). According to the report of the FFC for 2021-26, 15 of the 30 umbrella schemes account for about 90 per cent of total allocation under CSS. Besides, many umbrella schemes have, within them, a number of small schemes and some of them have negligible allocations.

 “A threshold amount of annual appropriation should be fixed, below which the funding for some CSS may be stopped. Below the stipulated threshold, the administrating department should justify the need for the continuation of the scheme. As the life cycle of ongoing schemes has been made co-terminus with the cycle of finance commissions, the third-party evaluation of all CSS should be completed within a stipulated time frame,” the report said. It had also said that the Union government should review and rationalise a large number of central sector schemes to reduce infructuous expenditure.

A senior finance ministry official said the process for re-appraising schemes has been going on and ministries are sending proposals for the continuation of some schemes or doing away with the redundant ones. The number of schemes is expected to come down by a third from 131 now. But finance ministry officials have pointed out that the aggregate expenditure on these wouldn’t reduce because some new schemes also get added.

 “The estimate is that two-thirds of the existing CSS will continue,” said the official cited above. There are a lot of “not-so-important schemes”, which also get a 10 per cent incremental budget every year. “We are now doing a systematic culling of the ones that are either too small or no longer relevant in today’s context or are of low impact…that money we will try to save and reallocate,” he added.

For example, there was a reduction in the number of schemes in nutrition and animal husbandry in this year’s Budget. The new CSS introduced in the Budget this year includes Mission Shakti, Saksham Anganwadi and Poshan 2.0, and Rashtriya Pashudhan Vikash Yojana. Allocation to centrally sponsored schemes went up 12.8 per cent in 2021-22 when compared with the Budget Estimate of 2020-21 (normal year assumption), which had seen growth of 9.8 per cent in the outlay. 

The allocation is, however, 1.7 per cent lower than the Revised Estimate of FY21, because the government had to increase spending to rescue the economy from the impact of the pandemic. The share of CSS marginally reduced to 10.94 per cent in FY22, compared to 11.1 per cent in FY21 Budget Estimate, and 11.2 per cent in FY22. While the Union government fully funds the central sector schemes, CCS are jointly funded by the Centre and states.

There are six schemes that are the most important for the central government and they include National Social Assistance Progamme and Mahatma Gandhi National Rural Employment Guarantee Programme. Economists said that this is not the first time that such an exercise is being carried out. A decade ago, The B K Chaturvedi committee had made a similar recommendation of restructuring the existing CSS and reducing their number to less than half.

“This is a continuous process. Even in the past, steps were taken to rationalise schemes, similar to what was suggested by the B K Chaturvedi committee. Efforts have been going on to increase revenue, along with rationalisation, as well as relooking at some of the existing schemes (expenditure),” said N R Bhanumurthy, vice-chancellor at Bengaluru-based B R Ambedkar School of Economics.

In the 2015-16 Budget, the Centre had delinked eight CSS, including National e-Governance Plan, Backward Regions Grant Funds, Modernisation of Police Forces, and Rajiv Gandhi Panchayat Sashaktikaran Abhiyaan (RGPSA) from its support. The sharing pattern was changed for 24 CSS with states having to contribute a higher share, while 31 continued to get full central sponsorship. The change was made in view of the higher devolution to states from 32 per cent to 42 per cent.