Modi government planning to transfer money directly to state governments

NEW DELHI: The Modi government may de-centralise funding of developmental activities by transferring money directly to states. If implemented, it will replace the system of Centre administering welfare schemes that at present leaves states with hardly any control over them.

Some of the big and small central schemes like Mahatma Gandhi National Rural Employment Guarantee Scheme, Jawaharlal Nehru National Urban Renewal Mission, National Rural Health Mission, Sarva Siksha Abhiyan, which have a cumulative budget of about Rs6,60,506 crore, could move into states’ domain.

At a meeting held at the PMO early this month, a senior official made a pointed reference to the issue of direct transfer of money meant for all centrally-sponsored schemes to states. By the end of the Eleventh Plan, about 52% of gross budgetary support to states was spent by the Union government directly through centrally-sponsored schemes, leaving just about 6.74% as normal central assistance for states.

“The idea seems to be to transfer a lump sum to states instead of the Centre asking for matching funds and utilisation certificates from states. The quantum of the money and how it would be divided among states could be decided by the ‘revamped planning commission’,” said an official involved in one of the brainstorming sessions. This also hinted at a ‘new planning commission’ taking shape.

BK Chaturvedi, a member of the planning commission, had in September 2011 submitted a report highlighting the flaws in the administration of centrally-sponsored schemes. “The states’ suggestion on CSS in the National Development Council meetings include: transferring CSS funds to the states without any restrictions; 100% funding of CSS with no counterpart state funds and flexibility in the implementation of the schemes,” he wrote.

Chaturvedi had also sought reduction of CSS from 147 to 59. In June 2013, the Manmohan Singh Cabinet, accepting the report, brought the number of schemes down to 66. It has also allowed 10% flexibility for the states.