Centre to release funds for schemes to States only on ‘need basis’, post full disclosure

Shishir Sinha New Delhi | Updated on May 11, 2020 Published on May 11, 2020

Falling short: A portion of Central funding is linked to performance to enhance quality and encourage health-sector reforms   -  The Hindu

To focus on a new effective monthly review of funds released and utilised

With the Covid-19 pandemic severely impacting the Centre’s revenue mobilisation, the Finance Ministry has made it clear that further release of funds for Central Sector Schemes (CS) and Centrally Sponsored Schemes (CSS) will only be on a ‘need basis’ after collecting detailed information. Also, there will be a new system of monitoring that will focus on a more effective monthly review.

Expenditure Secretary TV Somanathan has outlined the new system in a communication to all secretaries in Central government ministries and departments. The contents of the letter, as seen by BusinessLine, read: “For the current year, we are faced with twin challenges of not only substantially lower mobilisation, but also higher expenditure demands on the exchequer to accommodate the extra funding requirements of the relief and incentive packages.”

CS refers to schemes which are 100 per cent funded by the Centre and implemented by its machinery. As of now, there are 685 such schemes with a total outlay of over ₹8.31-lakh crore for the current fiscal.

Crop insurance schemes, PM-Kisan, subsidy for fertilisers and Price Stabilisation Fund are some of the main schemes under this category.

Under CSS, a certain percentage of the funding is borne by the States, which can vary, and the implementation is by the State governments. There are 30 CSS with total outlay of nearly ₹3.40-lakh crore. Rural Employment Guarantee, PM Awas, National Livelihood Mission are some of the key CSS.

The new system

The letter noted various requests for release of funds to States/Agencies without obtaining Utilisation Certificates and matching share from the respective States in case of CSS.

“While the strain on State exchequer on account of lockdown situation prevailing in the country is recognised, it is equally important that Central releases to State Treasury (in case of CSS) and implementing agencies (in case of CS and projects) do not remain parked,” the letter said, while mentioning that the Centre borrows money and pays interest while States park funds received from the Centre in treasury bills and earn interest.

Detailing the system for CSS, the Expenditure Department suggested that all Central government ministries and departments prepare a statement, comprising details such as unspent balances as on April 1, 2019 and on April 1, 2020; Central share released during 2019-20; due State share up to March 31, 2020; gaps in release of State share up to March 31, 2020; total funds available and actual expenditure during 2019-20.

Now, of the unspent amount as on April 1, 2019, only half the sanctioned funds may be released as the first tranche. The second tranche may be released only after due confirmation of the release of first tranche (along with State share) to State Nodal Agency along with utilisation certificate. Ministries will be required to confirm whether provision for States’ share has been made in their budgets or not.

Regarding CS, the system requires collection of information on a monthly basis regarding balance available with the implementing agencies as on April 1, funds released from April 1, total funds available, expenditure report till the end of the month and balance funds to be released.

Published on May 11, 2020

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