Polity and Governance

Rationalization of the Centrally Sponsored Schemes

What’s in News N.K. Singh, the chairman of the fifteenth finance commission, has said that there is a need for further rationalization of the Centrally Sponsored Schemes (CSS). CSS needs to be reduced for better spending as revenue buoyancy remains weak in indirect taxes. Tax Buoyancy Tax buoyancy is an indicator to measure the efficiency and responsiveness of revenue mobilization in response to the growth in the Gross domestic product or National income. A tax is said to be buoyant if the tax revenues increase more than proportionately in response to a rise in national income or output. Background Centrally sponsored schemes have always remained a bone of contention between the states and the central government and several committees have been formed on the same to look into the matter and give recommendations. In the early years of planning in India, the number of CSS grew result of which the number of schemes at the end of the IXth plan was 360. This, in turn, resulted in multiple schemes, the bureaucratic machinery creating empires within empires and duplication of man, money and material resources. Steps taken Over the Years •In 2013, the Government of India, realizing the CSS contributes to increasing in fiscal deficit and lesser output in return, restructured the CSS and reduced it from 147 to 66 schemes. •In 2015, a NITI Aayog panel of a subgroup of chief ministers headed by Shiv Raj Singh Chauhan was created to look into the rationalization of CSS. •The central government accepted the recommendations of the subgroup of Chief Ministers and took various steps towards such rationalization, such as reducing the number of centrally sponsored schemes from 66 to 28. Current Structure of CSS The Government has categorized 20 schemes as core schemes, 6 as core of the core schemes which have compulsory participation of states and 2 optional schemes where states have an option to choose. •Example for core schemes are- MGNREGA, National Social Assistance Program, Umbrella Scheme for SC, etc. •Example for core of core schemes are- Rashtriya Krishi Vikas Yojana, Rashtriya Pashudhan Vikas Yojana, etc. •Example for optional schemes are- Border Area Development Program, National River Conservation Plan. Fund Sharing Ratio- Centre to States •The center to state funding ratio for core of core schemes for general and special category states remains the already existing ratio. •The center to state funding ratio for core schemes for general states is 60:40 ratio and special category states is 90:10 ratio. •The center to state funding ratio for optional schemes for general states is 50:50 ratio and special category states is 80:20 ratio. Recent steps towards rationalization of CSS •All transfers to States for CSS are being routed via consolidated fund of the state. •Reduction in number of CSS from 66 to 28 •Flexibility to choose from optional schemes to the states. •Flexi-funds available in each CSS have been raised from 10 percent to 25 percent for states and 30 percent for union territories resulting in reduced rigidity on fund usage. Way Forward •Improving transfer of funds to States. •Evaluation of all CSS and reducing and categorizing further the number of schemes, such that states could follow a tailor-made approach for themselves in choosing schemes as it suits their need. •Designing a performance-linked financing model.

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