Finance Ministry initiates restructuring of central schemes, centrally sponsored schemes

The Finance Ministry has initiated an exercise to restructure Central Sector (CS) Schemes and Centrally Sponsored Schemes (CSS).

CS refers to schemes that are fully funded by the Centre.There are 685 such schemes, with the prominent schemes being the Crop Insurance Scheme, Interest Subsidy for Short Term Credit to Farmers, Fertiliser Subsidy and Food Subsidy.

Centrally sponsored schemes refer to schemes where a certain portion of funding requirement is borne by the Centre and the remaining by the states. The funding pattern could be in the ratio of 70:30, 60:40 or 90:10, with a higher portion borne by the Centre, while the scheme is implemented by state governments. There are 30 such schemes which include Employment Guarantee Schemes and PM Awaas Yojana.

“Necessary rationalisation of existing schemes should be ensured by administrative ministries/departments. The Department of Expenditure reserves the right to merge, restructure or drop any existing scheme/sub-scheme in consultation with the administrative ministry/ department to improve economies of scale for better outcomes,” an Office Memorandum issued by the Expenditure Department of the Finance Ministry said.

The Expenditure Department has asked various Central Ministries and Departments to send proposals for continuation of ongoing schemes beyond March 31, 2021. The proposal should be sent by January 15. “For continuation of schemes with estimated financial implications within the delegated financial powers of appraisal/ approval of the administrative ministry, the proposals may be appraised and approved in line with extant guidelines,” the OM said.

However, it must be kept in mind that total financial implications for the period 2021-22 to 2025-26 should be taken into account while deciding the appraisal/ approval authority. “Exceptions in this regard will be available to ongoing schemes whose approved sunset date is before the completion of this five-year period,” the OM said, while asking the ministries and departments to ensure completion of such appraisal/ approval before March 31, 2021.

The CS and CSS have been co-terminus with the Finance Commission’s cycles. However, when the period of the 14th Finance Commission came to an end on March 31, 2020, the report of the next Commission was awaited. Keeping that in mind, an interim extension was given till March 31, 2021 or till the date of recommendation of the 15th Finance Commission came into effect, whichever is earlier. Now, the 15th Finance Commission has given its final report for the period 2021-22 to 2025-26, which has necessitated the Finance Ministry to start the restructuring exercise.

The OM mentions that the recommendations of the 15th Finance Commission would be taken into account while deciding the expenditure allocation for schemes pertaining to particular sectors. It emphasises the constant endeavour of the government to rationalise the schemes through merging, restructuring or dropping existing schemes/sub schemes that are duplicate or have become redundant or ineffective with the passage of time.

The appraisal of the schemes is expected to be scheduled in February and March. “It may be noted that no scheme will be allowed to continue beyond March 31, 2021, if the appraisal for continuation is not completed by then,” the OM said, while adding that the review of infrastructure projects under the ministries of roads, railways, shipping and power, besides others, will be done separately.