Centrally Sponsored Schemes
The system of Centrally Sponsored Schemes forms a vital link between central planning and state execution within India’s federal arrangement. Extended under Article 282 of the Indian Constitution, Centrally Sponsored Schemes UPSC study materials emphasize how these schemes align state developmental spending with overarching national goals.
What are Centrally Sponsored Schemes
Centrally Sponsored Schemes are developmental programs formulated, designed, and partially funded by the Central Government but executed by State Governments and Union Territory administrations.
- Constitutional Basis: Governed under Article 282 (Discretionary Grants) to enable Central financial assistance for subjects largely in the State and Concurrent Lists.
- National Priorities: Designed to establish uniform standards in socio-economic sectors like health, education, housing, and rural employment.
Central Sector Schemes vs Centrally Sponsored Schemes
| Feature | Central Sector Schemes | Centrally Sponsored Schemes (CSS) |
| Funding Pattern | 100% funded by the Central Government. | Cost shared between Centre and States (e.g., 60:40 or 90:10). |
| Implementation | Executed directly by Central Ministries/Agencies. | Implemented entirely by State Governments/UTs. |
| Subject Jurisdiction | Formulated primarily on Union List subjects. | Formulated mostly on State List and Concurrent List subjects. |
| Examples | PM-KISAN, Central Sector Infrastructure, PM CARES. | MGNREGS, Jal Jeevan Mission, Samagra Shiksha. |
Importance & Major Centrally Sponsored Schemes List
Why are Centrally Sponsored Schemes Important?
- Balanced Regional Development: Mitigates developmental imbalances across financially weaker states.
- Minimum National Standards: Ensures basic rights to healthcare, sanitation, and primary education nationwide.
- Targeted Interventions: Mobilizes large-scale capital toward priority areas like poverty alleviation and infrastructure.
Major Schemes & Categorization
Under current frameworks, Government Schemes for UPSC under CSS are classified into:
- Core of the Core Schemes: Includes social protection programs such as MGNREGS and schemes for vulnerable groups.
- Core Schemes: Includes major sector initiatives like Pradhan Mantri Awas Yojana (PMAY), National Health Mission (NHM), Jal Jeevan Mission (JJM), PM Gram Sadak Yojana (PMGSY), and Samagra Shiksha Abhiyan.
- Optional Schemes: Sector-specific schemes where states enjoy higher flexibility in adoption and funding ratios.
Funding Pattern of Centrally Sponsored Schemes
The Centrally Sponsored Schemes Funding Pattern varies based on state categories:
- General Category States: Typically 60:40 (60% Centre, 40% State) or 50:50 depending on the scheme category.
- North-Eastern and Himalayan States: 90:10 (90% Centre, 10% State) to account for structural revenue constraints.
- Union Territories: 100% funded by the Centre for UTs without legislatures; shared for UTs with legislatures.
Major Issues Related to Centrally Sponsored Schemes
1. Encroachment on State Autonomy
By prescribing uniform conditionalities on State List subjects (like Health and Agriculture), CSS can distort local spending priorities and undermine state legislative space.
2. Fiscal Strain on State Budgets
Mandatory state matching contributions force states to divert funds from local needs to match central allocations, constraining discretionary fiscal capacity.
3. Rigid Guidelines & Implementation Friction
Universal “one-size-fits-all” design fails to account for diverse geographical and socio-economic realities across states. Delayed fund flow via state treasuries frequently hampers project execution.
Reforms, Commissions & Recommendations
Rationalisation of CSS & NITI Aayog
Following recommendations by the B.K. Chaturvedi Committee and the Sub-Group of Chief Ministers (headed by Shivraj Singh Chouhan) under NITI Aayog, the government rationalized dozens of overlapping schemes into distinct umbrella framework categories with defined sunset clauses.
Role of Finance Commission & GST Impact
- 14th & 15th Finance Commissions: Recommended increasing untied tax devolution to states (to 42% and 41% respectively) while rationalizing tied grants under CSS to enhance state fiscal autonomy.
- GST Integration: The implementation of GST pooled indirect taxes into a unified system, making state revenues dependent on Central GST transfers and reinforcing the need for balanced CSS co-funding.
Arguments Pro and Con
Arguments in Favour
- Promotes pooled resources for national objectives.
- Drives uniform accountability, social audits, and digital tracking (e.g., PFMS integration).
Arguments Against Excessive CSS
- Distorts state budget priorities through tied matching funds.
- Proliferation of duplicate schemes increases administrative overhead.
Way Forward
To strengthen Centre-State relations and fulfill cooperative federalism mandates, CSS structures require key systemic reforms:
- Flexibility: Increase the flexible fund component within CSS to allow states to adapt program execution to ground-level socio-economic realities.
- Outcome-Oriented Funding: Shift performance evaluation metrics away from simple expenditure tracking toward measurable physical and social outcomes.
- Institutional Coordination: Conduct mandatory consultations with state leadership through NITI Aayog and the Inter-State Council prior to finalizing scheme guidelines.
Conclusion
Streamlining CSS governance preserves core national priorities while granting states the fiscal space required to uphold genuine cooperative federalism. Rebalancing central guidance with state autonomy ensures that developmental spending yields maximum impact without compromising federal harmony.
UPSC Prelims: PYQs & Practice Questions
Practice Questions
Q: Consider the following statements:
1. The Executive Power of the Union of India is vested in the Prime Minister.
2. The Cabinet Secretariat functions under the overall direction of the Prime Minister.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (b) 2 only
Explanation:
Statement 1 is incorrect.
Under Article 53 of the Constitution, the
executive power of the Union is vested in the President of India.
In practice, the President exercises these powers in accordance with the
aid and advice of the Council of Ministers headed by the Prime Minister.
Statement 2 is correct.
The Cabinet Secretariat functions under the
overall direction of the Prime Minister and assists in
Cabinet coordination, inter-ministerial coordination and implementation of major government decisions.
Q: With reference to fiscal transfers between the Centre and the States, consider the following statements:
1. Discretionary grants given to States by the Centre under
Article 282 lie outside the purview of Finance Commission recommendations.
2. Centrally Sponsored Schemes are funded through transfers made under
Article 282 of the Constitution.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (c) Both 1 and 2
Explanation:
Statement 1 is correct.
Grants recommended by the
Finance Commission are primarily associated with
Article 275, whereas
Article 282 permits the Union or a State to make grants for any public purpose even if that purpose falls outside its normal legislative competence.
These discretionary transfers under Article 282 operate outside the Finance Commission's conventional tax-devolution and statutory grant framework.
Statement 2 is correct. Centrally Sponsored Schemes (CSS) are generally implemented by States with financial assistance from the Centre and derive their constitutional basis for such grants from
Article 282.
CSS are particularly significant in sectors such as
health, education, agriculture, rural development and social welfare,
where implementation often rests with State Governments.
Practice Questions
Q: With reference to the financial classification of government schemes in India, consider the following statements:
1. Central Sector Schemes are 100% funded by the Central Government and implemented by Central ministries.
2. Centrally Sponsored Schemes (CSS) are partially funded by the Centre and implemented by State Governments.
3. The Core of the Core Centrally Sponsored Schemes primarily focus on major social protection and inclusion programmes such as MGNREGS.
How many of the statements given above are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer: (c) All three
Explanation:
Statement 1 is correct. Central Sector Schemes are funded entirely by the
Central Government and are generally implemented through
Central ministries or departments.
Statement 2 is correct. Centrally Sponsored Schemes generally involve
cost-sharing between the Centre and the States,
such as 60:40 or 90:10 in specified cases, while implementation is largely undertaken through
State Government machinery.
Statement 3 is correct.
Under the rationalisation framework, CSS were classified into categories such as
Core of the Core Schemes, Core Schemes and Optional Schemes.
Core of the Core Schemes focus primarily on
social protection, vulnerable groups and inclusion-oriented programmes,
including major schemes such as MGNREGS.
Q: Which of the following committees/sub-groups was specifically constituted by NITI Aayog for the Rationalisation of Centrally Sponsored Schemes?
(a) B.K. Chaturvedi Committee
(b) Sub-Group of Chief Ministers headed by Shivraj Singh Chouhan
(c) Vijay Kelkar Committee
(d) Y.V. Reddy Committee
Answer: (b) Sub-Group of Chief Ministers headed by Shivraj Singh Chouhan
Explanation:
In 2015, NITI Aayog constituted the
Sub-Group of Chief Ministers on Rationalisation of Centrally Sponsored Schemes,
chaired by
Shivraj Singh Chouhan, then Chief Minister of Madhya Pradesh.
Its recommendations contributed to the restructuring of CSS into categories such as
Core of the Core, Core and Optional Schemes
and sought to improve
flexibility, efficiency and State participation in scheme implementation.
The B.K. Chaturvedi Committee had examined restructuring of Centrally Sponsored Schemes earlier under the
Planning Commission.
Therefore, option (b) is correct.
UPSC Mains – Previous Year & Practice Questions
Mains Previous Year Questions
[15 Marks]
Question: “ Centrally Sponsored Schemes (CSS) have often been criticized for encroaching upon the legislative and financial autonomy of States.” Critically analyse this statement in the context of Fiscal Federalism in India. (UPSC GS Paper II – 2023)
[15 Marks]
Question: “The restructuring of Centrally Sponsored Schemes based on the recommendations of the NITI Aayog Sub-Group of Chief Ministers aims to balance national priorities with State flexibility.” Discuss. (UPSC GS Paper II – 2021)
[10 Marks]
Question: How far do you agree that the proliferation of Centrally Sponsored Schemes creates fiscal distortions in State budgets? Examine the role of the 14th and 15th Finance Commissions in restoring fiscal autonomy to States. (UPSC GS Paper II – 2019)
[12.5 Marks]
Question: Distinguish between Central Sector Schemes and Centrally Sponsored Schemes. Discuss the major implementation challenges faced by States while executing CSS. (UPSC GS Paper II – 2017)
[10 Marks]
Question: Evaluate the impact of discretionary transfers under Article 282 versus statutory transfers under Article 275 on Centre-State financial dynamics. (UPSC GS Paper II – 2014)
Mains Practice Questions
[15 Marks | 250 Words]
Question: “ Uniform, top-down guidelines of Centrally Sponsored Schemes undermine local context and geographical realities.” Examine how greater flexibility in CSS design can enhance Cooperative Federalism in India.
[10 Marks | 150 Words]
Question: Analyse the impact of the Public Financial Management System (PFMS) and Single Nodal Agency (SNA) framework on improving accountability, transparency and fund-flow efficiency in Centrally Sponsored Schemes.
[15 Marks | 250 Words]
Question: “ Tied matching grants under Centrally Sponsored Schemes compel resource-constrained States to divert funds from vital local priorities.” Critically evaluate this assertion and suggest structural reforms to improve fiscal flexibility and State autonomy.
Centrally Sponsored Schemes-FAQs
What are Centrally Sponsored Schemes?
Centrally Sponsored Schemes are development schemes designed and partly funded by the Union Government but implemented by States and Union Territories.
Which Article supports Centrally Sponsored Schemes?
Article 282 supports discretionary grants by allowing the Union or States to make grants for public purposes.
How are CSS different from Central Sector Schemes?
Central Sector Schemes are fully funded and implemented by the Centre, while Centrally Sponsored Schemes are cost-shared and implemented by States or UTs.
What is the usual funding pattern of CSS?
Core Schemes generally follow 60:40 for general States and 90:10 for North-Eastern and Himalayan States, while UTs without legislatures receive 100% Central funding.
Why are Centrally Sponsored Schemes important for UPSC?
They are important because they connect fiscal federalism, Article 282, Centre-State relations, cooperative federalism, grants, welfare delivery and state fiscal autonomy.
