90:10 funding for NE States

After much hue and cry raised by Northeastern States, the Central government has agreed to provide Central funding with 90:10 ratio for core centrally sponsored schemes (CSS). Chief Minister Tarun Gogoi has said that the NE states had to fight hard for reinstatement of the 90:10 funding pattern, but there are other battles still to be fought for ‘restoration of the now suspended special category status and North East Industrial and Investment Promotion policy’. He has also flayed the rendra Modi government for ‘choking’ the flow of funds by drastically cutting down MGNREGA and other flagship programmes. Inevitably, there will be politicking and jockeying for credit in matters as serious as funding for welfare schemes. Union Minister of State for Fince Jayant Sinha recently stated in Shillong that there is no need for labels such as ‘special category States’ — rather, there will be just revenue deficit States which will get more grants through greater central tax devolution, as recommended by the 14th Fince Commission. Given the precarious fund position and meagre revenue sources of NE States, the Modi government’s new thinking about fincial magement and Central allocations has triggered much misgivings in this region.  On their part, chief ministers of the eight NE States ruled by the Congress, Left and regiol parties, through a unimous resolution, urged upon the Prime Minister to maintain the special category status.

To go into the entire gamut of issues related to central funding of welfare schemes, the NITI-Aayog had set up a chief ministers sub-panel headed by Madhya Pradesh CM Shivraj Singh Chauhan. Meghalaya Chief Minister Mukul Sangma pointed out that change in funding pattern for centrally sponsored schemes has put a lot of strain on limited State resources, bringing investment and growth to a standstill. Urging the Modi government to release special block grants as was done by successive Central governments, Sangma wondered how the Meghalaya government will fund schemes delinked from central support, as well as the ongoing Special Plan Assistance and Special Central Assistance schemes — which were earlier funded by special block grants. This dislocation in growth momentum would keep the NE States backward compared to resource-rich States and force the youth of this region to migrate, Sangma warned. In its submission, the Assam government said that due to the sudden change in central funding pattern, its Budget proposals this year have been derailed. The discontinuation of special block grants may end up offsetting the additiol resources awarded by the Fince Commission, with the supposedly ‘untied’ funds actually getting tied to meet the higher State share in centrally sponsored schemes. The Assam government also pointed out that resource allocation for CSS should be communicated by November-December, so that there can be effective planning and proper budgeting at the State level. The demand was also raised for hassle-free release of instalments and greater flexibility like special packages and flexi funds for completing ongoing centrally sponsored schemes.

After going through these and other points raised by the eight NE and three Himalayan States, the NITI-Aayog panel has now recommended that funding pattern in CSS should be 90 percent by the Centre vis-a-vis 10 percent by the State for ‘core sector’ schemes. As for ‘optiol’ schemes, the Centre should provide 80 percent of the funds. It has also agreed that change in funding pattern and discontinuation of block grants has put into disadvantage the NE States as well as the Himalayan States of J&K, Himachal Pradesh and Uttarakhand. Noting that these States have not been accessing Central assistance to their full potential, the chief minsters panel has called for streamlining the procedure of releasing central funds, besides keeping in mind that these States have short working seasons. However, with the Fince Commission’s new formula of devolving 42 per cent of central tax revenues to States, the Centre is also set to slash the number of centrally sponsored schemes from 72 to 30. The Union Fince ministry has indicated that only 17 schemes in this pruned down list will be classified under ‘core sector’. The NITI-Aayog panel is on the same page with the Central government, agreeing that central schemes be ratiolised and their numbers reduced to improve visibility and impact. It has recommended that the rural job guarantee scheme, Clean India mission, midday meals and housing for all should be the core sectors as far as centrally sponsored schemes are concerned. Significantly, the chief ministers panel has also called for ‘efficiency of resource use’, so that large flows of central assistance be effectively utilised in terms of outcome. This is important, for huge amounts of central funds have been invested in the NE region over the years, but the outcome has not been commensurate. Thanks to mismagement and rampant corruption, most NE States remain ‘special cases’ of total dependence on Central funds.