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Minister Prabhakar: Centre reneged on 2014 scheme promise, imposed 60:40 funding, shifting state burden.
Summary
Minister Ponnam Prabhakar alleged the Centre reneged on its 2014 promise to expand a scheme to urban areas. He claimed the Centre diluted the scheme by imposing a 60:40 funding pattern, shifting the financial burden to states. This highlights inter-governmental fiscal relations and policy implementation, crucial for understanding federalism and public finance in competitive exams.
Key Points
- 1Minister Ponnam Prabhakar made allegations against the Centre regarding a scheme's funding.
- 2The Centre's promise to expand the scheme to urban areas was allegedly made in 2014.
- 3The scheme was reportedly diluted by imposing a 60:40 funding pattern on States.
- 4This 60:40 funding pattern is alleged to have shifted the financial burden onto the States.
- 5The allegation concerns the Centre reneging on its commitment for scheme expansion to urban areas.
In-Depth Analysis
The statement by Minister Ponnam Prabhakar, alleging the Centre reneged on a 2014 promise to expand a scheme to urban areas and diluted it with a 60:40 funding pattern, brings to the fore critical aspects of India's fiscal federalism and Centre-State relations. This issue, while seemingly specific, encapsulates broader challenges in policy implementation, resource allocation, and the spirit of cooperative federalism.
**Background Context and What Happened:**
India's federal structure, though unitary in spirit, relies heavily on financial transfers from the Centre to the States. Centrally Sponsored Schemes (CSS) are a cornerstone of this arrangement. These schemes are designed by the Central Government on subjects predominantly in the State List or Concurrent List of the Seventh Schedule of the Constitution, but with a significant portion of funding provided by the Centre. Their objective is often to achieve national priorities like poverty alleviation, health, education, and rural development, ensuring a uniform basic standard of service delivery across states. Historically, CSS emerged during the planning era to steer national development goals. Over time, their number and scope expanded significantly. The allegation by Minister Prabhakar points to a specific instance where a commitment made in 2014 – likely concerning a social welfare or infrastructure scheme – to expand its reach to urban areas was allegedly not fulfilled. Instead, the Centre is accused of altering the funding mechanism, shifting from a more favorable central contribution to a 60:40 ratio, implying a greater financial burden on the states.
**Key Stakeholders Involved:**
1. **Central Government:** As the architect and primary financier of CSS, the Centre holds significant power in determining scheme design, eligibility criteria, and funding patterns. Its decisions directly impact states' fiscal health and policy autonomy.
2. **State Governments:** These are the implementing agencies for CSS. They bear the on-ground responsibility of delivery and are directly affected by changes in funding ratios. An increased financial burden can strain state budgets, potentially forcing them to cut back on other state-specific initiatives or borrow more.
3. **Beneficiaries (Citizens):** The ultimate recipients of these schemes, citizens in urban areas who were promised expanded coverage, stand to lose if the scheme's reach is curtailed or its effectiveness diluted due to funding constraints.
4. **Political Parties:** The ruling party at the Centre and opposition parties in states (like Congress in this instance) often engage in political discourse over such issues, using them to highlight governance failures or assert state rights.
**Why This Matters for India:**
This issue holds profound significance for India's governance and socio-economic fabric. Firstly, it directly impacts **Fiscal Federalism**. The Centre-State financial relationship is governed by Constitutional provisions, particularly **Article 280** which mandates the establishment of a Finance Commission every five years to recommend the distribution of taxes and grants-in-aid. **Article 282** allows the Centre to make grants for public purposes, even on subjects outside its legislative domain, which is the constitutional basis for CSS. Changes in funding patterns, like the 60:40 ratio, reflect a shift in fiscal responsibility. While a rationalization of CSS and funding patterns was recommended by the 14th Finance Commission (2015-2020) to increase untied funds for states, allegations of reneging on promises or diluting schemes challenge the spirit of cooperative federalism. Secondly, it affects **Public Finance and State Autonomy**. When states have to contribute more to centrally mandated schemes, their fiscal space for their own development priorities shrinks. This can lead to increased borrowing by states (**Article 293**) and potentially impact their compliance with state-level Fiscal Responsibility and Budget Management (FRBM) Acts. Thirdly, it has implications for **Urban Development**. If the scheme was intended for urban areas, its non-expansion or dilution directly affects the quality of life, infrastructure, and service delivery in India's rapidly urbanizing landscape.
**Historical Context and Future Implications:**
The debate around CSS funding is not new. The Gadgil-Mukherjee formula, used for central assistance for state plans, saw various iterations. Post-liberalization, the number and financial outlay of CSS grew substantially. The 14th Finance Commission significantly increased the states' share in the divisible pool of central taxes from 32% to 42% (now 41% after J&K reorganization), aiming to give states more untied funds and greater autonomy. This was accompanied by a rationalization of CSS, reducing their number and often revising funding patterns, including increasing the state's share. The 15th Finance Commission continued this trend. The current allegation suggests that despite these reforms, friction persists over the financial burden of specific schemes. Such disagreements can lead to states selectively implementing schemes, demanding more grants-in-aid, or even declining to participate if the financial burden becomes too high. This could result in uneven development across the country and undermine national objectives. Future implications include continued pressure on state finances, potential for political confrontation between Centre and states, and the need for greater transparency and consultation in designing and funding CSS to foster genuine cooperative federalism.
Exam Tips
This topic falls under GS Paper II (Polity & Governance - Federalism, Centre-State Relations, Social Justice, Government Policies & Interventions) and GS Paper III (Economy - Public Finance, Fiscal Policy, Government Budgeting).
Study the recommendations of the 14th and 15th Finance Commissions regarding devolution of taxes and grants, and their impact on Centrally Sponsored Schemes (CSS) vs. Central Sector Schemes. Understand the rationale behind various funding patterns (e.g., 90:10 for special category states, 60:40, 50:50).
Common question patterns include analytical questions on the challenges to fiscal federalism in India, the role of CSS in national development, the impact of changing funding patterns on state finances, and the constitutional provisions governing Centre-State financial relations (Articles 268-293, especially 280, 282, 293).
Be prepared to discuss the arguments for and against CSS, their effectiveness, and alternatives to improve cooperative federalism and empower states financially.
Practice essay questions on 'Cooperative and Competitive Federalism' and 'Challenges to Fiscal Autonomy of States in India' by incorporating examples like the one mentioned in the article.
Related Topics to Study
Full Article
Ponnam Prabhakar alleged the Centre had reneged on its 2014 promise to expand the scheme to urban areas and instead diluted it by imposing a 60:40 funding pattern on States, thereby shifting the financial burden

