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Economic and Political WeeklyFebruary 3, 2007
he transfer of resources from the centre to the states ismade on the basis of the recommendations of CentralFinance Commissions, plan grants by the Planning Com-mission and centrally sponsored schemes (CSS) of variousministries and departments. Some of these resources in the formof financial assistance through various CSS and transfers basedon the recommendation of Central Finance Commissions aredirected towards panchayati raj institutions (PRIs). Following the73rd amendment to the Constitution PRIs have assumed greatersignificance and were entrusted with the task of implementingmany of the poverty alleviation programmes. The present studyquantifies the CSS going to the states and identifies the com-ponents reaching the PRIs. For Madhya Pradesh and other majorstates, it provides per capita estimates of CSS releases to the PRIsfor the years 2004-05 and 2005-06, and a scatter of that againstper capita GSDP. It further examines the utilisation of funds bythe PRIs under some of the important CSS in Madhya Pradesh.The plan of the paper is as follows; Section I looks into thenature of CSS going to the states and identifies those reachingthe PRIs and quantifies them. Section II examines the statespecific CSS flows to PRIs in Madhya Pradesh and provides acomparative picture with the other major states. Concludingremarks are given in Section III.
ICentrally Sponsored Schemes
The vertical imbalance that exists in the finances of the centraland state governments is addressed through the transfer of sharein central taxes based on the recommendations of the CentralFinance Commission, and grants to the states. The states alsoreceive central assistance for their plans in the form of block/ unconditional grants (normal central assistance) from the Plan-ning Commission. The CSS form part of the central plan as theyare meant to provide additional resources to the states for imple-menting programmes that are considered by the government of India to be of national/regional importance. The transfers underthe CSS pertain to subjects that are under state domain. Overthe years, the CSS has become an important tool of the centralgovernment to influence policies and expenditures on subjectsconstitutionally allocated to the states. Such proliferation of CSSover the years has reduced the flexibility of state governmentsin prioritising their expenditure pattern.The CSS are designed by the central ministries and the outlayand nature of the individual schemes is determined by the pro-visions and guidelines attached to the respective schemes. ManyCSS have a requirement of matching contribution from the stategovernments. The funds to the states under the CSS are routedin two ways. Some of them are designed to be routed only throughstate budgets while others bypass the state budget. However, aclear classification of all these schemes into these two categoriesis not available from the central budget. A set of CSS budgetedunder the specific account head 3,601, which refers to grants-in-aid to state governments are routed only through state budgets.The outlays for the others are provided under specific heads of different ministries/departments. These CSS may either be routedthrough the state budget or through districts authorities, state levelregistered societies, and local bodies bypassing the state budget.From the budgetary provisions for the CSS, it is not explicitwhether or not they bypass the state budget. The separation of CSS schemes into two streams was done with the help of thecentral budget, outcome budget and detailed demands for grantsof the various government ministries/departments.
Scheme-wise outlays of the ministries/departments are given in theExpenditure Budget and in the detailed demand for grants fromwhich CSS going through the state budget (account head 3,601)are identified and quantified. Scrutinising all the state sectorschemes and their outlays from the outcome budget of each centralministry/department helped us in identifying and quantifying theschemes that are going through the state budget and those bypassingit. Under each of these CSS, the amounts going to the north-eastern states are given under a separate budget head (accounthead 2,552). These figures were incorporated to arrive at thescheme specific amounts.CSS bypassing the state budget go through various imple-menting agencies like districts authorities, state/district level
Central Flows to Panchayats
A Comparative Study of Madhya Pradesh
Central flows to panchayati raj institutions consist of assistance through centrally sponsored schemes, and transfers based on recommendation of Central Finance Commissions. TheCSSare of two types, one routed through state government budgets, and the othebypassingstate budgets. The paper quantifies these and identifies the components of the second going topanchayati raj institutions. For Madhya Pradesh and other major states, the paper  provides per capitaestimates of CSS releases to the PRIs for 2004-05 and 2005-06.
, M
, P
adhya Pradesh Economy
Economic and Political WeeklyFebruary 3, 2007
registered societies, and local bodies. However, it is not possibleto identify the final recipients of these CSS from the budgetdocuments, detailed demand for grants or the outcome budgets.This was done by examining the detailed guidelines of all theseschemes. These CSS are then grouped into those going to thePRIs/district rural development agency (DRDA) and those goingto other agencies like districts authorities and state/districtlevel registered societies. CSS routed through the state budgetand going to PRIs can be identified from the respective stategovernment budgets and form part of the overall state assistanceto PRIs.After identifying the CSS bypassing the state budget and thefinal recipients of these, they have been quantified for theyear 2006-07 using central budget documents and the detaileddemands for grants of each ministry/department. From the budgetdocuments for the year 2006-07 a total of 195 CSS have beenidentified of which 41 bypass the state budget and the remaining154 are routed through the state budgets (Annexures 1 and 2).In 2006-07 total CSS flow to the states amounted to Rs 61,318.48crore as can be seen from the chart, which gives details of thecentral flow to the states in the form of assistance throughCSS and transfers based on recommendations of the CentralFinance Commission. The CSS going through the statebudgetamounted to Rs 24,802.28 crore and those bypassingthestate budget amounted to Rs 36,516.20 crore in the year2006-07.Out of the 41 schemes bypassing the state budgets 10 schemesamounting to Rs 21,407.90 crore in 2006-07 have been identifiedas reaching the PRIs, as can be seen from Table 1. These areSampoorna Grameen Rozgar Yojana (SGRY), National Food forWork Programme (NFFWP), Swarnjayanti Gram SwarozgarYojana (SGSY), Indira Awaas Yojana (IAY), National RuralEmployment Guarantee Scheme (NREGS).
Integrated Waste-lands Development Programme (IWDP), Drought Prone AreasProgramme (DPAP), Desert Development Programme (DDP),Central Rural Sanitation Programme (CRSP) and Member of Parliament Local Development Scheme (MPLADS).
The proportion of total CSS funds routed through the statebudget and those bypassing it is illustrated in Figure 1. The CSSfunds bypassing the state budget constitutes 59.55 per cent of total CSS funds in the year 2006-07 and 34.91 per cent of totalCSS funds go directly to the PRIs/DRDA. Thus, from the abovediscussion it is clear that a larger proportion of CSS fundsbypass the state budgets and a sizeable part of it goes directlyto the PRIs.
IICSS Fund Flow to PRIs in Madhya Pradesh
In the earlier section, we identified the CSS under which fundsreach PRIs bypassing the state budgets. In the chart we indicatedthe total amount going to PRIs under these schemes. However,the state-wise allocation is not based on any predeterminedformula. In order to get state specific figures for the CSS fundreaching the PRIs, we have in this paper concentrated on eightmajor schemes that account for 91 per cent of the total CSS fund
@Excludes Central Assistance to State Plans.(1)PRIs include DRDA which manages the funds received under differentpoverty alleviation programmes to be implemented by the PRIs.(2)We have assumed that 75 per cent of the funds under MPLADS arespent in the rural areas and PRIs are the preferred implementingagencies.(3)Using the trend growth rate (10.296 per cent) for the period the newGDP base was projected for 2006-07 which amounts to Rs 38,95,071crore.(4)We have assumed that the entire funds under NREGS go to PRIs.
Table 1: Centrally Sponsored Schemes Reaching PRIs
(In Rs crore) 
SlSchemes2006-07No(BE)1Sampoorna Grameen Rozgar Yojana (SGRY)30002National Food for Work Programme (NFFWP)03Swarnjayanti Gram Swarozgar Yojana (SGSY)12004Indira Awaas Yojana (IAY)29205National Rural Employment Guarantee Scheme (NREGS)113006Integrated Wastelands Development Programme (IWDP)4537Drought Prone Areas Programme (DPAP)3608Desert Development Programme (DDP)2709Central Rural Sanitation Programme (CRSP)72010Member of Parliament Local Development Scheme(MPLADS)1185Total21408
Expenditure Budget 2006-07 
, Vols 1 and 2, Ministry of Finance,GoI, 2006.(2)Detailed Demand for Grants, various ministries for 2006-07,GoI, 2006.
Figure 1: CSS through State Budget and BypassingState Budget
CSS through StateBudget 40.45 per centCSS bypassing StateBudget 59.55 per centPRIs34.91per centOthers24.64per cent
Chart: Central Assistance to the States, 2006-07
Central Assistance states @Rs90,724.98 crore(2.33 per cent of GDP)Centrally Sponsored Schemes(195 schemes)Rs 61,318.48 crore(1.57 per cent of GDP)
Twelfth Finance CommissionGrants payable to statesRs 29,406.50 crore(0.75 per cent of GDP)CSS through State Budget(154 Schemes)Rs 24,802.28 crore(0.64 per cent of GDP)CSS By-passing State Budget(41 Schemes)Rs 36,516.20 crore(0.94 per cent of GDP)CSS reaching PRIs(10 Schemes)Rs 21,407.90 crore(of which NREGSRs 11,300 crore)CSS reaching otheragencies(31 Schemes)Rs 15,108.30 crore
Central Assistance States@ Rs 90,724.98 crore(2.33 per cent of GDP)Centrally Sponsored Schemes(195 Schemes)Rs 61,318.48 crore(1.57 per cent of GDP)Twelfth Finance CommissionGrants payable to statesRs 29,406.50 crore(0.75 per cent of GDP)CSS through State Budget(154 Schemes)Rs 24,802.28 crore(0.54 per cent of GSP)CSS Bypassing State Budget(41 Schemes)Rs 36,516.20 crore(0.94 per cent of GDP)CSS reaching PRIs(10 Schemes)Rs 21,407.90 crore(of which NREGSRs 11,300 crore)CSS reaching otheragencies(31 Schemes)Rs 15,108.30 crore
Economic and Political WeeklyFebruary 3, 2007
flows to the PRIs in 2006-07. These are SGRY, NFFWP, NREGS,SGSY, IAY, IWDP, DPAP and DDP. We have confined ouranalysis to these eight schemes for the years 2004-05 and2005-06 only because of the unavailability of state-wise datafor these schemes for 2006-07.
In 2004-05 and 2005-06 PRIs in Madhya Pradesh have receivedCSS funds comprising of both central and state releases underseven schemes as reported in Table 2. Total releases under theseschemes in 2005-06 were Rs 1,105.24 crore out of which thecentral share was Rs 1,012.68 crore. As regards utilisation of available CSS funds, except for NFFWP, the per cent utilisationin 2005-06 was much lower as compared to that in 2004-05.The higher utilisation percentage under NFFWP in 2005-06was due to the inclusion of NREGS amounts in the utilisationfigure.Madhya Pradesh is a relatively poor state having a per capitaGSDP of Rs 16,356.88 in 2005-06 and a rural poverty ratio of 37.06 per cent as per 1999-2000 Planning Commission estimates.The total per capita releases under the various CSS for povertyalleviation reaching PRIs in Madhya Pradesh were Rs 176.59in 2004-05 and increased to Rs 227.29 in 2005-06. Table 3 givesa comparative picture of total per capita CSS releases to PRIsfor 2004-05 and 2005-06 for 17 major states. From the Table3 we can see that in 2005-06 Jharkhand received the highest percapita releases while Punjab the lowest.From Table 3 one can see that the poorer states like Jharkhand,Bihar and Orissa receive the highest per capita amount as com-pared to richer states like Punjab, Goa, and Haryana, whichreceive the lowest. This inverse relationship becomes more evidentwhen we compare per capita releases with the per capita GSDPacross the major states. Figures 2a and 2b give the scatter plotof per capita releases and per capita GSDP for the years 2004-05 and 2005-06 respectively. States which have a relativelyhigher per capita GSDP receive relatively lower per capita fundsand vice versa. However, there is a large variation in per capitareleases of CSS funds for some of the poorest states as can beseen from the dotted band in Figures 2a and 2b. For the pooreststates like Jharkhand, Orissa, Chhattisgarh, Madhya Pradesh,Uttar Pradesh and Rajasthan, which do not have wide variation
Table 2: Releases and Utilisation of CSS Funds in MP
(In Rs crore) 
Schemes2004-052005-06Central ReleasesState ReleasesTotal ReleasesUtilisationCentral ReleasesState ReleasesTotal ReleasesUtilisation(Per Cent)(Per Cent)SGRY287.14101.31388.4593.30287.8757.24345.1257.77SGSY55.1616.8472.0092.8755.4311.0066.4358.76IAY105.9535.32141.2692.9195.9224.31120.2382.43NFFWP158.08-158.0842.92339.09-339.0973.63IWDP29.06-29.06-48.99-48.99-DPAP52.88-52.88-48.24-48.24-NREGS----137.14-137.14-Total688.27153.47841.74 -1012.6892.561105.24 -
(1) Utilisation refers to expenditure as per cent of total fund availability (total releases + opening balance).(2) Utilisation under NFFWP in 2005-06 includes NREGS.
Annual Reports of Ministry of Rural Development, GoI.
Table 3: Per Capita CSS Releases
(In Rupees) 
States2004-052005-06Jharkhand360.01475.16Orissa270.04368.91Chhattisgarh222.45303.21Bihar275.08240.86Madhya Pradesh176.59227.29Andhra Pradesh143.92198.31Tamil Nadu175.75193.04Maharashtra165.11174.81West Bengal124.70166.05Karnataka144.58150.98Gujarat108.13148.61Uttar Pradesh141.08138.83Rajasthan101.17122.74Haryana84.9693.32Kerala92.0393.24Goa78.7878.27Punjab40.6750.52
Annual Reports of Ministry of Rural Development, GoI.
Figure 2a: Scatter Plot of Per Capita Releases andPer Capita GSDP, 2004-05
Per Capita GSDP (2004-05) (Rs)
   P  e  r   C  a  p   i   t  a   R  e   l  e  a  s  e  s   (   2   0   0   4  -   0   5   )   (   R  s   )
Figure 2b: Scatter Plot of Per Capita Releases andPer Capita GSDP, 2005-06
Per Capita GSDP (2005-06) (Rs)
   P  e  r   C  a  p   i   t  a   G   S   D   P   (   2   0   0   5  -   0   6   )   (   R  s   )

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