Funda of funds release & NITI

For some time now, the media has been highlighting the fracas between the BJP and the TDP about the release of funds due to the Andhra Pradesh state from the Central government. While the leaders of the former claim that lakhs of crores have been given, those of the latter maintain that it is a mere thousands of crores. Even in the past, when Amit Shah announced one number, Arun Jaitely put out another one.

Now the state leaders of the BJP are spewing out numbers stating this much has been given for this purpose and that much for that. Needless to say, all this has left the general public totally confused about what really is going on.

In the meantime, Pawan Kalyan, the Jan Sena party leader, has undertaken the responsibility for constituting a Fact-Finding Committee comprising such leading and eminent personalities as K Padmanabhaiah, Dr Jayprakash Narayan, IYR Krishna Rao and Undavalli Arun Kumar. The general expectation is that the Committee will put out its report sometime this week.

The fundamental doubt that arises is as to why there is so much difference between the numbers emerging from different quarters.

One can understand doubts arising, about the particular context in which a word having several meanings has been used, in a given situation. But how can that happen in respect of a number? For instance, nine will be read as such by everyone. 

A number, after all, cannot change! It is possible, however, that in respect of statistics generated by numbers, clever interpretations can lead to different conclusions. For instance, a school in which 9 out of 10 people appearing for an examination get a first division will put out an advertisement saying that it has a 90% first division success rate. 

On the other hand, another school, with just one student who has got a first division, will be quite right in claiming that it has got a hundred per cent first division rate! After all, the second school is not wrong. This is probably why it has been said that statistics comes as a poor third, after lies and despicable lies.

Arun Kumar, in a mild and benign twist to the age-old adage, has said that “governments do not lie, they merely hide the truth.” As Sir Robert Armstong put it, they may not “lie” but may merely be being “economical with the truth.”

Such jugglery with words is often indulged in by the ruling party, in a state or at the centre, when it is trying to impress the people with its government’s success in different fields. For instance, while refuting an allegation that no money has been released for an important irrigation project for which a 100 crore release was slated, the government may claim that twice as many as much money has been released in the current year as was done in the previous one. 

A close scrutiny may, however, reveal that, in fact, 2 crores were released in the current year compared to only 1 last year! Another common subterfuge is to use percentages or absolute numbers as may be convenient in a given context while trying to bamboozle the public.

Coming back to the issue of release the funds to the Andhra Pradesh state, it is in the absolute figures that the difference is arising, causing a doubt whether the numbers being bandied about are allocations or actual releases.

In this context, it is necessary to dwell at some length on the dispensation that governs the release of funds from the Centre to the States.

Earlier, when the Planning Commission was in existence, the administration of central programmes/schemes rested with it. In view of the emergence of the Niti Aayog, it has been shifted to the central ministries concerned.

There are now (in accordance with the decision on taken by the Governing Council of Niti Aayog in its first meeting on 9th March 2015) what are known as 28 umbrella schemes with flexibility to states to administer the admissible components in line with state-specific requirements (6 categorised as Core of the Core schemes, 20 as Core schemes and 2 as on Optional schemes) which are hundred per cent funded by the central government, and the state schemes are designed, funded and implemented entirely by the states.

Core schemes will have compulsory participation by the states whereas participation amongst the optional schemes would be by choice.

Core of the Core schemes are legislatively backed or are designed to sub-serve the vulnerable sections of our population and existing pattern will continue for these schemes. The sharing of funding as between the Centre and the States is either 90% and 10% or 60% and 40% for Core schemes (in respect of the 8 North-Eastern states and three others – namely Himachal Pradesh, Jammu and Kashmir and Uttarakhand, generally known as the Special Category Status States)

80% and 20%, and 50% and 50% for the optional schemes for the same states as above.

The Central government normally releases funds to the states every quarter in respect of the programmes run by it. The release for a quarter is no longer contingent (as it was in the past) upon the production by the state of the utilisation certificate (UC) for the previous quarter. It is now done on the basis of the production of the UC for the last to last or penultimate installment.

A pre-authorisation based approach would be adopted on a financial year basis, with a gradual transition towards an automated “just-in time” release of cash on a quarterly basis during 2016-17 to remove uncertainty in release of central share of Umbrella schemes.

Sometimes, however, when there is some delay on the part of the state in the production of the UC for a given quarter, the funds for the subsequent quarter may be released provisionally, subject to subsequent production of the UC. 

The exception to this arrangement is the MNREGA in respect of which the system of Direct Benefit Transfer (DBT) is in force and the funds, in the shape of wages, are directly transferred to the workers’ accounts, and the state government is not required to produce any UC.

It is, of course, possible that the 15th Finance Commission, which has just been constituted, may recommend some changes in this system.

While the extant in system has been functioning quite satisfactorily, it cannot be gainsaid that certain improvements are still possible.

There is, for instance, no dispensation at present for a state to seek redressal of a grievance that it may nurse in respect of the release of funds from the Central government, either in terms of the timeliness or the adequacy thereof. No doubt, the central government controls the funds and has, therefore, the right to seek whatever information it needs from the states, in respect of releases made during the implementation of a programme, or otherwise. 

Still, it is possible that a state may have a complaint that a particular release due to it has been delayed or completely denied, causing a given programme to undergo a time or cost overrun, thereby inconveniencing the state and the beneficiaries of that programme. In such an event, at present, there is no avenue for agitating for a solution to such a difficulty. 

In other words, there may be a need for an agency that can play the role of an arbiter as, in the current arrangement, it does seem like the Centre is acting a like the judge, the jury and the prosecutor all rolled into one.

It might be well worth it for the Finance Commission or the National Development Council or, for that matter, the Niti Aayog, to address this and other such difficulties in the existing dispensation while undertaking future reviews especially against the background of the Centre and the States desiring to move towards a new paradigm of Cooperative Federation.