In continuation of its policy of promoting ‘cooperative federalism’, the Centre has now allowed States to have more say in using funds under Centrally Sponsored Schemes.

Identifying 25 per cent of CSS allocations as flexi-funds, the Finance Ministry has now said that these can be used “to satisfy local needs and undertake innovations in areas covered by the CSS”.

The flexi-fund component of CSS was earlier 10 per cent, but has now been raised to 25 per cent for States and 30 per cent for Union Territories.


In a recent missive, the Finance Ministry has, however, said flexi-funds should not be used to substitute States’ own schemes and project expenditures or for unproductive expenditure such as construction and repair of offices and residences of government officials, general publicity and purchase of vehicle and furniture.

It has also said the facility will not be available for schemes which emanate from legislation (such as the Mahatma Gandhi National Rural Employment Guarantee Act) or where a large proportion of the budgetary allocation is flexible (such as Rashtriya Krishi Vikas Yojana and Border Area Development Programme).

“It would be permissible to use flexi-funds to converge different schemes under an umbrella programme to improve their efficiency,” said the Ministry.

In 2016-17, the Centre has allocated ₹2,26,820.70 crore to CSS. Back of the envelope calculations reveal that the fresh guidelines would free up at least ₹35,000 crore for States to use according to their requirements.

The move follows a recommendation of the sub-group of Chief Ministers that was set up by the NITI Aayog to rationalise CSS.

States will have to set up a State Level Sanctioning Committee with participation from the nodal Central Ministry to approve projects under the flexi-fund component.