Lok Sabha Question No. 145 (STARRED), answered on 2016-11-25
Subject: Allocation of Funds to States
Ministry: FINANCE
Asked by: ARVIND GANPAT SAWANT

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA

## STARRED QUESTION NO. *145

## TO BE ANSWERED ON FRIDAY 25 th  November, 2016 [4 Agrahayana, 1938 (SAKA)]

'Allocation of Funds to States'

## No. 145, SHRI ARVIND SAWANT,

Will the MINISTER OF FINANCE be pleased to state:

- (a) whether modification in the allocation of taxes and duties between the Union Government and the States/UTs has led to delinking of  many schemes from Union Government support and is so, the details thereof and the reasons therefor;
- (b) whether this move has affected the fund flow for developmental projects of States/UTs and if so, the details thereof;
- (c) whether some of the States have represented against the revised Central Taxes allocation and if so, the details of points/issues raised by them;
- (d) the reaction of the Government thereon; and
- (e) the corrective steps taken by the Government in this regard?

## ANSWER

FINANCE MINISTER                                                            (SHRI ARUN JAITLEY)

(a) to (e): A Statement is placed on the table of the House.

## Order No. 5

Statement referred to in reply to Lok Sabha Starred Question No. *145 for answer on  November  25,  2016  raised  by  Shri.  Arvind  Sawant,  Member  of  Parliament regarding 'Allocation of Funds to States'.

The Fourteenth Finance Commission (FFC) after considering all factors, recommended enhancement in the share of the States in the divisible pool of Central Taxes and Duties from  32%  to  42%  with  effect  from  2015-16,  which  was  accepted  by  the  Union Government. The Explanatory Memorandum on FFC recommendations submitted to the President also brought out that the unconditional transfers of funds to states in the form of higher tax devolution will allow the states greater autonomy in financing and designing schemes as per their needs and requirements. In view of acceptance of the Fourteenth  Finance  Commission's  recommendations  of  increasing  States'  share  the Union  Government  decided  to  change  the  funding  pattern  of  Centrally  Sponsored Schemes.

Centrally Sponsored Schemes have been broadly divided into three categories i.e. (i) Schemes to be full supported by Union Government which are of national priorities, carrying  legal  obligations  and  especially  meant  for  the  poor;  (ii)  Schemes  to  be  run with  the  changed  sharing  pattern  having  partial  funding  by  both  the  Union  &  State governments;  (iii)  Schemes  completely  transferred  to  the  States  and  delinked  from Union Support. List of Schemes delinked from Union Support is enclosed as Annex 'A'.

The move has not affected the fund flow of the states as the States started receiving higher share in Central Taxes and Duties by 10%.

No  State  has  represented  against  the  acceptance  of  Fourteenth  Finance  Commission (FFC)'s recommended enhancement in the share of the States in the divisible pool of Central Taxes and Duties from 32% to 42%.

However,  the  Government  received  representations  from  states  regarding  changed pattern in the Centrally Sponsored Schemes (CSS). Government set up a Sub-group in NITI  Aayog  under  the  convenership  of  Sh.  Shivraj  Singh  Chauhan,  Hon'ble  Chief Minister, Madhya Pradesh consisting of 12 members, including 10 Chief Ministers of various states, to examine the current Centrally Sponsored Schemes (CSS) framework and recommend sharing pattern and measures for streamlining, flexibility, reforms in

Centrally  Sponsored  Schemes  &  coordination  between  the  Centre  and  States  for achieving the objective of the Schemes.

The Government has accepted the recommendations of the Sub-group and NITI Aayog on  17 th August  2016  has  issued  modalities  regarding  rationalization  of  Centrally Sponsored  Schemes  (CSS)  including  their  funding  pattern.  The  approved  funding pattern of the Centrally Sponsored Schemes (CSS) is as follows:

- i. The  existing  funding  pattern  will  continue  for  Core  of  the  Core schemes.
- ii. For Core Schemes, the funding pattern for the 8 North Eastern States and Himalayan States of Uttarakhand, Himachal Pradesh and Jammu & Kashmir shall be Centre: 90% and State: 10%, whereas for the rest of the States this ratio shall be Centre: 60% and State: 40%.
- iii. For  Optional  Schemes,  the  funding  pattern  for  the  8  North  Eastern States  and  Himalayan  States  of  Uttarakhand,  Himachal  Pradesh  and Jammu & Kashmir shall be Centre: 80% and State: 20%, whereas for the rest of the States this ratio shall be Centre: 50% and State: 50%.
- iv. Ordinarily, no CSS will be sanctioned where the central share is less than 50%.
- v. However, all the sharing patterns indicated above shall be subject to the proviso that if the central share is already below that indicated in the  sharing  pattern,  then  the  Centre's  share  would  remain  capped  at their present level.'

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## Schemes delinked from support from the Centre

|   1. | National e-Governance Plan                                                       |
|------|----------------------------------------------------------------------------------|
|    2 | Backward Regions Grant Funds                                                     |
|    3 | Modernization of Police Forces                                                   |
|    4 | Rajiv Gandhi Panchayat Sashaktikaran Abhiyaan (RGPSA)                            |
|    5 | Scheme for Central Assistance to the States for developing export infrastructure |
|    6 | Scheme for setting up of 6000 Model Schools                                      |
|    7 | National Mission on Food Processing                                              |
|    8 | Tourist Infrastructure                                                           |

## Annex - 'A'