Centrally sponsored schemes, or CCSs, have been taking a lot of heat recently.
Bihar chief minister Nitish Kumar has accused the government of using centrally sponsored schemes to meddle in states’ affairs. Gujarat chief minister Narendra Modi agrees. Even the Planning Commission, in its approach paper to the twelfth plan, admits that CSSs have been plagued by “poor implementation, duplication, lack of convergence and suboptimal results.” (Though we imagine the authors of the report would disagree with Kumar and Modi on whose fault this is.) As reluctant as we are to agree with a person like Modi, he and Kumar are right –the profusion of centrally sponsored schemes not only erodes state’s rights but also hinders development. The confusing morass of government policies that are centrally sponsored schemes is in drastic need of a good pruning.
The idea behind centrally sponsored schemes is not inherently bad. In any federal nation, the central government has a responsibility to ensure a uniform, minimum level of access to basic public services across all states. Yet centrally sponsored schemes, as they are used now by the centre, go far beyond this mandate. No one quite seems to know how many such schemes there are but the consensus is that there are quite a lot. (None of the experts we talked to knew the exact figure. Estimates range from a little over a hundred to well over a thousand.) What is more clear is that the share of centre-state transfers routed through CSSs has risen dramatically. According to N.C. Saxena, member of the National Advisory Council, the share of Central Assistance funding made up by centrally sponsored schemes doubled between 1980 and 2000, from roughly one third to two thirds. By steering ever larger shares of funds through centrally sponsored schemes the central government is not just ensuring basic access to public services but attempting to micro-manage the task of governing.
At first glance, a little micro-management in government may seem like a good thing. The Planning Commission, with its band of highly educated technocrats, certainly elicits a higher degree of confidence than most state level ministries. Why not entrust the messy process of designing social programs to such skilled officials at the centre?
Yet this comparison ignores a few key facts. First, Planning Commission members, as smart as they are, most likely do not know the local needs of people in rural Arunachal Pradesh as well as officials from that state. Further, even if they did they would be hard-pressed to design a scheme which meets the needs of residents of rural Arunachal Pradesh while simultaneously being equally appropriate for people living in rural Tamil Nadu. Yet this is exactly what a one-size fits all centrally sponsored scheme must achieve. The result is that huge funds are spent on rural roads even in areas with excellent road connectivity (as PMGSY does in Tamil Nadu) and on electrification in areas with excellent access to electricity (as RGGVY does in Gujarat). Detailed guidelines and the constitutional requirement of universality prevent either the centre or states from modifying such schemes to suit local needs.
Second, as Yamini Aiyar, Jay Chaudhuri, and Jessica Wallack point out, centrally sponsored schemes replace the usual lines of accountability with a vicious cycle of mutual denial. When faced with poor outcomes, the centre blames states for poor implementation while the states in turn duck responsibility by saying that they have no control over how funds are spent.
Third, micro-managing development funds is a horribly inefficient way to run a bureaucracy. Because each scheme comes with its own reporting requirements, local officials often spend a large share of their time fulfilling compliance and auditing requests rather than on more substantive work. In addition, for several schemes, separate state or district level societies have been created to manage the funding and implementation of the schemes. These parallel institutions not also reduce states’ autonomy but also make it harder for them to come up with comprehensive, integrated plans for improving public service delivery.
We may also question whether the central government is really as benign and capable as the argument at the beginning of this essay presumed. The aggressive marketing and branding of the flagship schemes by the central government reveals that it is concerned not just about these scheme’s impact on the aam aadmi but also that the aam aadmi gives credit for these schemes to them (and not to the state governments). And while the Planning Commission enjoys a reputation as a highly competent institution, it has made little progress in setting up robust monitoring systems for centrally sponsored schemes.
The solution to this quandary is not wholesale eradication of centrally sponsored schemes. As we pointed out in the beginning, the central government has a responsibility to ensure access to basic public services and centrally sponsored schemes are a legitimate means of fulfilling this obligation. Rather, the number of centrally sponsored schemes should be reduced to a manageable number. Further, the monitoring of the remaining schemes should be radically revamped. Monitoring should focus on the key metrics so that onerous reporting requirements are not imposed on local officials and, to the extent possible, reporting processes should be similar across schemes.
There would likely be an increase in cases of obvious mis-spending of funds if the number of centrally sponsored schemes was cut and more funds were transferred from the centre to the state as untied grants. That is no reason not to cut centrally sponsored schemes anyway. States should be entrusted with their constitutionally reserved right to determine how best to provide public services and allocate funds between different sectors. They will certainly make mistakes, but over the long term, we firmly believe that these mistakes will be outweighed by the progress made possible by greater autonomy.