A taskforce of the Niti Aayog chaired by Madhya Pradesh Chief Minister Shivraj Singh Chouhan has recommended that 25 per cent of the corpus of funds available under Centrally sponsored schemes (CSS) be made available to the states without any conditions or strings attached. If, indeed, the Modi government accepts this, states would have access to funds amounting to Rs 42,000 crore this fiscal without having to worry about meeting stringent terms. According to a report in this newspaper, the taskforce has also made a case for pruning the number of CSS from 67 to 25-30. These suggestions appear to reflect the growing demand from many states for greater flexibility in choosing the areas or sectors on which to spend the funds allocated to them by the Centre for such schemes, in keeping with varying levels of economic development, infrastructure, demography and other factors. After coming to power last year, the BJP-led government, which had touted the virtues of cooperative federalism, was quick to yield on this front with higher transfers of funds to states, and by wielding the axe on CSS.
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Abhijit Sen, a member of the 14th Finance Commission, had, in his dissent note, flagged some of these concerns and the possible disruption a higher one-shot devolution of funds could create. He may be right. While greater flexibility and leeway to states on CSS may be desirable, the timing and impact of such a move on outcomes and fiscal discipline also need to be assessed. In the pursuit of cooperative federalism, it should not be that hasty action damages state finances.
