Centrally Sponsored Scheme

What are Centrally Sponsored Schemes?
  • CSS are schemes designed by union government but implemented by states
  • Their funding is shared by centre and state with a pre-defined ratio.  Generally the fund ratio is 75:25 for normal states and 90:10 for special category states
What is the controversy around CSS?
  • Funds available under CSS are tied funds i.e. funds can be spend only for respective schemes for ex. Funds for Sarva Shiksha Abhiyan can be spend on SSA only and nothing else. Now, some states like Kerala don’t need expenditure under SSA so Kerala losses its share of money.
  • States need to spend matching fund to avail money from centre i.e. to avail 75% share from centre, state needs to spend their share of 25% first. Now many states do not have capacity to spend this 25%. So they don’t get money under that head.
  • They bereft states of innovations and funds in other sectors which is required given the regional disparities in various sectors and force states to spend the funds is pre-defined sectors. Kerala for example, does not see any point in Sarva Shiksha Abhiyaan as they do not have problem illiteracy.
What are the recommendations of 14th FC regarding CSS?
The 14 finance commission has asked the centre government to reduce the number of CSS as they—
  1. Impinges on fiscal autonomy of states, as they do not have any say in design of the scheme and face many restriction in their implementation.
  2. The states are required to provide a defined share to the CSS– this makes difficult for the states the required level of budgetary support for their own expenditure.
  3. little or insufficient co-ordinations and consultation by the central government with the states regarding framing of policies, allocation of funds, regional specific needs and their implementations. The erstwhile planning commission was the sole powerful body involved in planning CSSs .
  4. ‘One size fits all’ policy has been adopted in the implementation of CSSs so far and regional specific needs or state wise local needs has been overlooked.
  5. Too many number of schemes led to overlapping and interfering goals and implementation which took resources away from the core schemes.
A critical relook at CSS is required, as suggested by B.K. Chaturvedi committee and NITI Aayog CM’s subgroup on CSS, to make them relevant, useful and successful.
What can be done?
  1. Reducing their number to manageable level.
  2. Categorizing them into “Core” and “Optional” based on national developmental priorities.
  3. Increase the flexi component in them to provide flexibility to state to suit their requirement. Flexi funds – There may be different priority for the states but the health, Sanitation etc. is priority for all but in different quantum. Centre shall give 20% flexibility in the use of the Funds.
  4. Rather than national, a regional approach on their design may be more effective.
  5. Consulting state in their design and implementation. A forum for continuous dialogue, feedback and learning could set effective precedent for “cooperative federalism”.
  6. Establishing better synergies at district level among various CSS and avoiding tendency to create parallel machinery for each of them.
What are Flexi Funds? How are they related to CSS?
  • Flexi Funds means that states if they so desire can set aside 25% of any CSS as flexi-fund to be spent on any sub-scheme or innovation or component that is in line with the overall aim and objective of the approved Centrally Sponsored Scheme.
  • States can use the fund to satisfy local requirements in areas affected by internal security disturbances or to undertake mitigation or restoration activities in case of natural calamities.
  • Under the new norms, flexi-funds in each CSS has been increased from the current 10% to 25% for states and 30% for Union Territories.
  • In the last decade, the proliferation of big-ticket Centrally Sponsored Schemes (CSS) has emerged as the key fiscal strategy to transfer grants to States to achieve a certain outcome in a specific sector, especially in health, education, agriculture and rural development. In the light of recent recommendations made by the Fourteenth Finance Commission, critically examine if the existing fund transfer mechanism is suited to achieve the goal of ‘cooperative federalism’, if not, suggest what needs to be done in this regard. (200 Words)
  • It is generally accepted that the centrally sponsored schemes(CSS) have failed to meet their objectives due to various factors. Critically examine these factors. What measures would you suggest to make these schemes work? Substantiate. (200 Words)

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