The Centrally Sponsored Schemes (CSS are funded entirely or partly by the central government but implemented by the states. E.g. Mid-Day Meal, Swachh Bharat Mission

and MNREGA.

The jurisdiction of The Centrally Sponsored Schemes (CSS) lies outside the subjects allocated to the Union Government in List I of the Seventh Schedule of the Constitution.

Problems with it: 

• • The 14th Finance Commission recommended increasing the state’s share of the divisible pool of taxes from 32% to 42%. But to ensure that the centre’s finances are not affected, there is a need to reduce CSS to balance out the loss.
  • Instead of thinking and acting locally, the Government of India is thinking and even acting centrally.
  • The Centre lacks the knowledge of local conditions and thus cannot properly monitor its implementation.
  • It is against the principles of Federalism and devolution as the centre is infringing on state subjects.
  • In the 1950s, state governments did not have finances, so implementing CSS seemed logical. But now the situation has changed.
  • It puts an additional burden on state governments for funds allocation and its implementation.
  • Further, when funds are transferred directly to implementing agencies in States, the irregular advanced payments have resulted in an accumulation of funds in the supply pipeline.
  • Also, the focus of the government should be on strengthening Panchayati Raj Institutions (PRIs). But instead of that, parallel structures are being created to implement them.

• Recommendations: In this background, PM Modi formed a NITI Aayog subgroup consisting of a panel of CMs which submitted its draft report in 2015 in which it recommended the following:

⇒ Reduce the total number of CSS from 72 to 30.

⇒ Divided these CSSs into two broad groups:  Core Schemes: will include legislatively-backed schemes like Mid-Day Meal, Swachh Bharat Mission and MNREGA.

⇒ Optional Schemes: The schemes for themes like social inclusion and social protection.