Central schemes must pass ‘effectiveness’ test to continue, Pg14

Key Highlights:

• All Central and Centrally Sponsored Schemes (CSS) must demonstrate positive evaluation outcomes to be extended beyond FY 2025–26.
• Sunset clause made mandatory: every scheme must include a predefined end date.
• 260 CSS and 54 Central Sector Schemes are due for reappraisal by March 31, 2026.
• The total outlay for any continuing scheme over the 16th Finance Commission cycle must not exceed 5.5 times the average expenditure from FY 2021–22 to FY 2024–25.
• Even demand-driven schemes like MGNREGS will operate under fixed fund limits, based on projected beneficiaries.
• NITI Aayog is appraising CSS; third-party evaluations are ongoing for Central schemes.
• Ministries must justify upward revisions and balance budgets across schemes under the fixed ceiling.

Detailed Insights:

• The Finance Ministry aims to instill fiscal discipline by tying continuation of schemes to performance evaluations.
• Emphasis is placed on output and outcome-based governance rather than traditional input-based budgeting.
• The sunset clause ensures periodic review and discourages indefinite continuation of underperforming schemes.
• By capping future outlays to 5.5 times recent spending averages, the government is attempting to control cost escalations.
• Even flexible schemes like MGNREGS will face fund restrictions, marking a shift towards predictable and accountable spending.
• The policy aligns with broader goals of rationalising government expenditure, improving efficiency and ensuring value-for-money in public service delivery.

Scientific/Technical Concepts Involved:

• Sunset Clause: A policy instrument that sets a pre-defined expiration date for laws or schemes unless renewed.
• Outcome-Based Budgeting: Linking budget allocation to measurable performance outcomes instead of just inputs or outputs.
• Finance Commission Cycle: A five-year cycle defined by recommendations of the constitutional Finance Commission on resource sharing.

Mains Mock Question:
Critically examine the implications of introducing sunset clauses and fund-limited structures for Central and Centrally Sponsored Schemes in India. How might this reform impact welfare delivery and fiscal discipline?