Plan panel mulls conditional CSS funds for states

Funds for Centrally Sponsored Schemes may be given as loans amp; converted to grants once targets met

The Planning Commission is mulling over a proposal to transfer funds for Centrally Sponsored Schemes CSS to states on a conditional basis. As part of its new reforms agenda,the Plan panel is examining whether funds for the CSS could henceforth be extended as loans and once the states meet their stipulated targets,the money could be converted into grants.

Out of the total Gross Budgetary Support GBS of 3.24 lakh crore,nearly Rs 1 lakh crore is earmarked for CSSs.

In a note prepared for states chief ministers ahead of the commencement of regional consultation process for the 12th Plan period,the Commission has also made it clear that availability of funds for subsidies and developmental works would be lesser except for health and education. The GBS for other sectors will go down, the Commission said. So,the Plan panel has suggested the proposed formula of converting loans into grants once targets are met by the states.

We are enthused by the success of such a funding mechanism in the Accelerated Power Development and Reforms Programme APDRP and have seen that the achievement rate of targets are very high. So why not replicate the same model for CSS also?, a Commission official stated.

Another key reason behind this proposal is the lack of ownership of the CSSs by the states and its consequent effect in terms of their poor implementation,the official said.

The states,on their part,have consistently argued that CSSs are structured too rigidly to permit innovations and meet local specificity. Concurring with the states,the Commission is also planning to reduce the number of such schemes to a few which are of national character and dictated by the rights and entitlements of citizens. There are over 190 schemes and the Plan panel wants just around 50 schemes for the Central government to execute.

For the rest,we have proposed flexi-funds in the concerned Central ministries,which could be leveraged to support state-level innovations or up-scaling the successful experiments, the official said. The planning body has further constituted a committee under its member B K Chaturvedi to recommend the schemes which can be merged.

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While financially rich states like Gujarat and Maharashtra may agree to the proposed model of CSS funds as loans,their weaker counterparts like Jharkhand and Bihar are likely to disagree. The official,however said the model would be applicable for developmental works and not for programmes such as Mahatma Gandhi National Rural Employment Guarantee Act MGNREGA aimed at giving direct benefits to people, he said.

The planning body has also made out a strong case for making power charges flexible. Prices of electricity are not sufficiently flexible and regulators are being restrained from allowing periodic price increases, the note said. The demand side management of energy is as important as action on the supply side. Realistic pricing will help, it observed. On the water front,the panel is pushing for introducing a new groundwater law reflecting principles of Public Trust Doctrine on the lines of the European Union.