UNIT 19 FISCAL FEDERALISM IN INDIA

Structure
19.0 Objectives
19.1 Introduction
19.2 Federalism
19.2.1 Federalism in India
19.2.2 Fiscal Federalism in India

19.3 Theory of Fiscal Federalism

19.4 Inter Governmental Transfers in India
19.4.1 Central Finance Commission
19.4.2 Union Ministries
19.4.3 State Finance Commissions

19.5 Let Us Sum Up

19.6 Key Words
19.7 Some Useful Books
19.8 Answers or Hints to Check Your Progress Exercises

19.0 OBJECTIVES
After reading this unit, you will be able to:
 present an ‘overview’ of the concept of ‘modern federalism’ ;
 contrast the nature of ‘federalism in India’ with those in other countries;
 explain the structure of ‘fiscal federalism in India’;
 discuss the various elements of the ‘theory of fiscal federalism’;
 outline the role of central Finance Commission (FC) in India with a focus on
‘criteria and weights’ considered over the last few FC Reports; and

 delineate the role of ‘Union Ministries’ and ‘State Finance Commissions’

with a critique on their strengths and weaknesses.

19.1 INTRODUCTION
Politically, countries are classified as federal or unitary, depending on the
autonomy that the constituent parts of the State (country) enjoy in governance.
Federalism is a political dispensation of a State wherein constituent units enjoy
autonomy to such an extent that sovereignty is shared between the union and the
‘units’ (often called States). So, a State has States within it. The word ‘federation’
etymologically means union or league by agreement. However, fiscal federalism
is not confined to federal countries only. It has more to do with division of
responsibilities and resources between two (or more) level of government (or
administrative units) irrespective of whether the State is politically federal or not.
For instance, People’s Republic of China is politically a unitary state but has an
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elaborate administrative structure (with province, prefectures, counties and Fiscal Federalism
township governments, each with certain responsibilities and sources of revenue). in India
Yet, there exist inter-governmental transfers of resources as fiscal capacity and
fiscal requirements differ across governments at different levels. The principles of
fiscal federalism, therefore, apply in most countries even when they are not
considered politically federal.

19.2 FEDERALISM
Modern federalism developed with the emergence of the US in 1776 when
thirteen British colonies in America, asserting to be States, declared Independence
from Britain and constituted into United States. They created a ‘Confederation and
Perpetual Union’ between them and wrote the Articles of Confederation in 1777
which became effective from 1781. While it ensured sovereignty to the
constituting States, the Union lacked taxing powers and adequate contribution did
not come from the States. After much debate, a new Constitution with adequate
powers for Union government (and office of the President as CEO) was adopted
in 1789. Following its example, other countries like Canada and Australia too
adopted this form of government which later came to be known as federal.
In recent times, however, there are some political unions which have evolved as
variants of federalism. On one side, there are unions like European Union (which
are Confederations of sovereign member-states), while on the other, there are
unitary states like the UK devolving quite a few powers to its constituent units
with their own legislatures. France and Italy too have both devolved powers (or
autonomy) to their regions. It is often suggested that a multi-ethnic country can be
better governed as a federal state. However, the form itself is no guarantee as there
can be several other factors which can play their roles. The USSR (1991),
Yugoslavia (1992) and Czechoslovakia (1993) have all fragmented in the last few
decades. The USA’s is a case of unification as it started as a Union of 13 States
and today there are 50 States with none divided or breaking away. Bangladesh
broke away from Pakistan as they were culturally too different (besides feeling
exploitation of the East by the West) while the East and the West Germany
unified.

19.2.1 Federalism in India

Before Independence, Government of India Act 1935 was modelled on federal
principles. After Independence, Constituent Assembly of India deliberated for
about three years and finally India adopted the Constitution of India with about
560 princely states integrated with India. In later years, Pondicherry, Goa and
Sikkim also became part of India.
Though India is considered a federal country, Indian Constitution is tilted towards
the Union. For this reason, some scholars call it ‘semi-federal’ or ‘quasi-federal’.
As compared to the US, the States (units) of India do not have their own
constitution and their formal heads, the Governors, are appointed by the Union.
There is a single citizenship (as opposed to US where there is an additional state
citizenship), judiciary and election with centralised audit functions. President’s
rule can be imposed on States under certain circumstances. There are a host of
regulatory parastatal (inter-governmental agencies) under the control of the Union
and the States have to seek permission from them in many cases. Yet, it could be
said that India is fairly federal as there are two exclusive parts in the Constitution
delineating the structure and functioning of legislative and executive wings. Part
XI deals with the relationship between the Union and the States. In this, there are 99
Fiscal Federalism two separate Lists of items (the Union List and the State List) for legislation by
the Union Parliament and the respective State Legislatures. There is also a
Concurrent List where both Union Parliament and State Legislatures can make
law. However, Article 254 holds that a law, if made by Parliament, shall prevail.
Likewise, Part XII deals with financial relationship between the two, including
taxation domains, tax-sharing, grants and borrowing.
Unlike the USA, Australia or Switzerland but like Canada, Parliament has
residuary power and, therefore, can make law on any matter not enumerated in
any of the Lists. This is how service tax was imposed in 1993 by a law made by
Parliament. Generally, it is found that there is an accretion in the Union List and
Concurrent List but diminution in the State List. For instance, through 46th
Amendment carried out during Emergency, five subject-matters [viz. (i)
education, (ii) forests, (iii) weights & measures, (iv) protection of wild animals &
birds and (v) administration of justice] were moved from State List to Concurrent
List.
When it comes to executive power, States have to observe that it exercises its
power in such a way as to not impede the powers of the Union whereas the Union
can give direction to the State in several matters. State legislations on certain
matters require President’s assent after passage by State legislature and in certain
other matters even at bill stage. For instance, there are tribal areas in some States
where State legislation may not be applicable as the Governor, who is President’s
appointee, has say in those matters.
Local governments are normally created by sub-national States where States have
their own constitutions. In countries where States do not have their constitutions,
the national constitution enables States to make law and constitute local
governments. However, in quite a few federal countries, local governments are
specifically provided for in the Constitution. India followed the former tradition
and allowed States to make provisions in law and constitute suitable local
government structure. However, States were found to be deficient and it was
found that quite often local government were dissolved. After prolonged parleys
and several attempts, Articles 243 through 243ZT were incorporated into the
Constitution (some having mandatory provisions and some enabling provisions
for the States) in the matter of local governments viz. Panchayats and
Municipalities. They are popularly said to constitute the third tier in federal set-up
though these governments do not have all three wings of government viz.
executive, judiciary and legislature.

19.2.2 Fiscal Federalism in India

Constitution of India delineates tax bases between the Union and States listing
them in the Union List and the State List respectively (as provided in the Seventh
Schedule under Art 246). There was/is no taxation provision in the Concurrent
List. However, when GST had to be introduced, it needed to be provided for
concurrent base for which Article 246A was inserted (as 101st Amendment in
August 2016). This enabled the Union to make law for CGST (central GST) and
IGST (integrated GST) and the States could legislate for SGST. There is an
elaborate scheme, in the Constitution, of levying, collecting and appropriating
taxes and duties between the Union and State governments. All taxes where States
are authorised to make law, are levied, collected and appropriated by States. There
are certain duties which are levied by the Union but collected and appropriated by
States in their respective jurisdictions. There were taxes (e.g. inter-state sale and
100 consignment of goods) which were to be levied and collected by Union but were
to be assigned to the States where they were collected. After introduction of GST, Fiscal Federalism
this has become part of IGST and State’s share is to be assigned. Barring a few in India
taxes and duties, surcharges and cesses, all taxes and duties which are to be levied
and collected by the Union, are to be shared between the Union and the States in
the manner recommended by the Finance Commission.
There are also similar enabling provisions for States with respect to their local
governments. To begin with, Union was supposed to mandatorily share some
taxes. But since 2000, most taxes and duties, have to be shared by the Union with
the States. However, the divisible pool does not include proceeds of cesses and
surcharges collected along with taxes. The share of this exempted part in the
Union’s gross tax revenue is estimated to have increased from 7.5 percent (in
2000-01) to over 13.0 percent in 2013-14. The argument by the Union is that
‘cesses and surcharges’ are levied for specific purposes and the Constitution does
not make them part of divisible pool. The Union presently collects taxes on
Income (Personal and Corporations), Excise (on Petroleum & Petroleum Products
and Tobacco Products), Customs, and CGST and shares them with the States.
States collect several taxes and duties including SGST, VAT (on alcoholic drinks
and petroleum & petroleum products), Motor Vehicle Tax, Stamp Duty, etc.
Taxes on agricultural income are minimum and yield from land revenue is not
substantial. Besides sharing of taxation proceeds, the Union is supposed to give
grants-in-aid to the States under Articles 275 and 282. There is also provision for
‘grant-in-lieu of tax’ for States of Assam, Bihar, Odisha and West Bengal
exporting jute and jute products.
In addition to taxes, there are non-tax revenue resources which are chiefly
dividends from public enterprises, fees or royalty on use of natural resources like
spectrum, mineral fields, etc. All departments collect some fees and fines.
Governments also receive interest (as they pay out) on loan extended to other
governments, state enterprises and employees. It was envisaged that there would
be vertical as well as horizontal imbalances in fiscal resources. To address this
issue, Article 280 provides for a Finance Commission (FC) [to be constituted by
the President after every five years] to adjudicate the sharing of resources between
the Union and the States. Further, after the introduction of Parts IX and IXA
dealing with Panchayats and Municipalities respectively, Finance Commission is
also tasked to suggest measures to augment States’ resources so as to help them
supplement the resources of their local governments. In particular, the FC is asked
to make recommendations on: (i) distribution of net proceeds of taxes between the
Union and the States and allocation of States’ share among States, (ii) principles
that should govern the grants-in-aid to the States out of the Consolidated Fund of
India, and after 1994, (iii) the measures needed to augment the Consolidated Fund
of a State so as to supplement the resources of the Panchayats/Municipalities in
the State on the basis of the recommendations made by the Finance Commission
of the State. The President can choose to refer any other matter to the Commission
in the interest of sound financial position for states. Exhaustive Terms of
Reference (ToR) are handed over along with the appointment of the Commission
(Chairman and Members) every once in five years with disaster management
appearing as a recurring feature in the ToR. Finance Commission considers
different submissions received, consults State governments, meets academics,
makes calculations of revenues and expenditures on normative bases, evolves
criteria for inter-se distribution of States’ share of taxes among states (usually in
percentage terms) and recommends grants-in-aid to those States which are in need
of aid, local government grants, disaster management grants, and at times, sector-
specific grants. But the recommendation made by the FC have to be acted upon by
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Fiscal Federalism the Government and by and large it has been accepting Finance Commission’s
recommendations.
In 1993 through an Amendment (under Articles 243H and 243X), Constitution has
mandated the States to: (i) authorise their respective Panchayats and
Municipalities to levy, collect and appropriate such taxes, duties, tolls and fees as
they deem fit, (ii) assign such taxes, duties, tolls and cess as they deem fit, and (c)
provide for making grants-in-aid from Consolidated Fund of the State. Further,
under Articles 243I and 243Y, in every State, a Finance Commission is to be
constituted after every five years to recommend, among others, taxes that may be
assigned to and shared with, besides grants-in-aid to be given to, Panchayats and
Municipalities.
Check Your Progress 1 [answer within the given space in about 50-100 words]
1) How is India a federal State?
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2) State the status of local governments in India as per the Constitution.
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3) State the constitutional scheme of tax division between the Union and the
States in India.
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4) How are the grants provided by the Union to the States in India?
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 Fiscal Federalism
19.3 THEORY OF FISCAL FEDERALISM in India

The rationale for two or more levels of government is that government at one level
cannot carry out diverse functions suiting the demands of regional requirements
and preferences. Functions might differ across various parts of the country and it
is presumed that governments nearer to people would understand their
requirements better. Hence, functions of local reach and spillovers should be
carried out by sub-national governments. For instance, street lighting can be
efficiently provided by a local government but ‘source of lights’ (i.e. electricity
generation and transmission) may have to be governed at a higher level. While
lamp posts using kerosene oil or solar lamp may be a local affair, extraction of
kerosene oil or making of solar lamp or regulating these activities would not be
local. However, using terminology suggested by Musgrave, Union Government
are most suited to carry out ‘stabilisation and redistribution’ functions, whereas,
unit and sub-unit (i.e. state and local) governments should handle reallocation
functions.
The ideal principle of division of taxes, based on theory, is that Union should tax
mobile bases like corporate profit or excise (manufacturing) while Units should
tax immobile bases like property, agriculture or consumption. This obviates the
phenomenon of ‘voting by feet’. However, mobility is a relative factor as there
cannot be a unique set of bases across countries. In practice, a combination of
levy, collection and appropriation are applied. For instance, there may be tax
rental arrangement whereby one level of government levies and collects but
proceeds are passed on to another level of government. In a confederation, unit
governments may fork out their contributions to the union and meet out their
expenditure with grants and devolutions from higher level governments. Often, it
is found that resources with Union are more than commensurate with their
expenditure responsibilities, while the reverse is true of the Units. Further, while
fiscal capacities of all Units are not equal, responsibilities may not differ that
much. Inter-Unit disparities, where exists, also need to be addressed.
Mismatch between the Union and the aggregate of Units is called ‘vertical
imbalance’ while that between Units is called ‘horizontal imbalance’. Vertical
imbalance is sought to be corrected by sharing of net proceeds (of the taxes levied
and collected by the Union) between the Union and the Units. The shares are
decided by the adjudicating body by considering revenues and expenditure, on
normative basis, of the Union and the Units. There is a possibility of moral hazard
in that Units may not put best efforts to mobilise resources when they know that
the gap is going to be bridged by Union.
Even after legitimate sharing of Union tax proceeds, there may remain resource
gaps for certain Units. This is sought to be met by grants-in-aid from the Union.
However, there is a trade-off between tax devolution and grants-in-aid since
higher devolution through tax-sharing leaves smaller capacity for grants-in-aid.
Tax devolution is preferred on the ground of entitlement whereas grants are seen
as gratuity (i.e. payment given out of free will). However, grants are an equalising
mechanism whereas tax devolution is an allocation device. In India, in the formula
for horizontal sharing of tax proceeds, redistribution bias is introduced to some
extent.
In addition to grants, national concerns are prioritised by national schemes
launched. For financing these schemes, funds are made available from the Union
while Units implement the schemes. In order to make Units stakeholders, grants
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Fiscal Federalism are made on a matching basis. This is in the sense that the Units also contribute
funds to some extent. For some Unit-specific schemes, Union may also come
forward. In India, there are several centrally sponsored schemes which are
implemented by Union ministries through State governments.
Most countries have governments, at more than two levels. In some countries,
they get explicit mention in the Constitution (e.g. Switzerland, Brazil and India).
Certain resources may get transferred directly from the Union government to local
governments, which may themselves have sub-tiers. In India, States are given
these grants by the Union but they have to be immediately passed on to the local
governments. Further, State Finance Commissions are supposed to make
recommendations on tax-sharing and grants-in-aid to local governments within
their jurisdictions. In contrast, grant-in-lieu is a compensation for not levying a tax
on the suggestion of a higher level of government. India is unique in its
democratic set-up with as many as 2,40,000 lowest level Panchayats and more
than 4000 Municipalities. These have more than 3 million (30,00,000) elected
representatives in local governments.
Check Your Progress 2 [answer within the given space in about 50-100 words]
1) Why does a country require two or more levels of government?
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2) On what principles, are allocations of tax bases are made?
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3) Distinguish between type of grants.
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19.4 INTER GOVERNMENTAL TRANSFERS IN

INDIA
104 Resources are generally transferred from the Union to the Units. In India, it
means: (i) Union to States, (ii) Union to Local Governments through States, and Fiscal Federalism
(3) State to Local Governments. Further, transfers from: (a) Union to States are in India
executed through Finance Commission and Union Ministries and (b) Union to
States through recommendations of Central Finance Commission and from State
governments to Local Governments through respective State Finance
Commissions. From 1950 to 2014, Planning Commission (PC) which was in
existence in India used to discharge the role of allocator of Plan grants and also of
loans to the States. Finance Commission (FC) is restricted in its scope to
disbursement of non-plan grants and tax-sharing. With the replacement of PC by
NITI Aayog, the latter does not undertake allocation of budgetary resources any
more. This shift in institutional responsibilities contributed for a quantum jump in
the allocation of net proceeds from the divisible pool i.e. from 32 percent to 42
percent between the awards of the XIIIth and the XIVth Finance Commissions
respectively.

19.4.1 Central Finance Commission

In India, in recent decades, have progressively increased the percentage of States’
share from the centre (for the 10th, 11th, 12th, 13th, and 14th Finance Commissions)
from 29 to 29.5 to 30.5 to 32.0 and 42.0 percents respectively. For correction of
horizontal imbalance, the criteria evolved have varied. There have been two major
arguments in this regard: (i) more populous Units should have higher shares and
(ii) states with larger areas should have higher shares. While both the criteria are
themselves meritorious, densely populated states seeking higher weight to
population than the sparsely populated ones has also received attention. A fourth
argument is made for poorer states to be awarded higher shares. There is also an
argument that states doing well and contributing more should receive a higher
share of central resources. The various arguments made, thus, broadly fall on
grounds of equity and efficiency. Apart from these, reward for fiscal discipline,
critical infrastructural needs following the criterion of backwardness have been
made. The Finance Commissions have duly tried to accommodate most of these
concerns by according different weights particularly over the last few decades
(Table 19.1). Overall, therefore, FCs have followed three principles: (i) meeting
the residuary budgetary needs after taking into account tax shares, (ii) ensuring
minimum expenditure across States and (iii) meeting the special needs,
obligations and needs of specific sectors of national importance. Grants have thus
been provided for meeting: (a) revenue deficit, (b) disaster relief (c) needs of local
governments, (d) sector specific needs and (e) State-specific needs.
Table 19.1: Criteria and Weights (Percent) Used for Arriving at the
Horizontal Shares from Net Divisible Pool
Population Area Income Fiscal Tax Infrastructure Demographic Forest
FC Distance Discipline Efforts Change Cover
Tenth 20.0 5.0 60.0 5.0 -- 10.0
Eleventh 10.0 7.5 62.5 7.5 5.0 7.5
Twelfth 25.0 10.0 50.0 7.5 7.5 --
Thirteenth 25.0 10.0 47.5 -- -- 17.5
Fourteenth 17.5 15.0 50.0 10.0 7.5
Note: Income distance is measured as the difference between highest per capita income state minus per capita income of the
state in question.

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Fiscal Federalism 19.4.2 Union Ministries
The Union ministries fall in the areas of Union List, State list or Concurrent Lists.
Many areas in Concurrent Lists are traditional domain of the States. They run
several schemes either on their own or in partnership with State governments. The
schemes can be broadly divided into two categories viz. Central Sector (CS)
Schemes and Centrally Sponsored Schemes (CSS). The former (CS) ones are
generally in areas of the Union List, formulated and implemented, and fully
funded, by the by Union Ministries. The latter (CSS) are in the domain of State or
Concurrent List and are formulated by a Union Ministry but implemented by State
Governments. Funding for CSS is shared between the Union government and
concerned State governments in a ratio (like 50:50, 70:30, 75:25, and 90:10) with
the funds transferred to the concerned implementing agencies by both the
governments. The CSS are in the areas of education (e.g. mid-day meal), health,
irrigation, housing, child development, employment, village roads, wild life, etc.
They are considered as equalisation efforts in meritorious services. Many of these
schemes have been too small to make any impact so much so it is critiqued that if
resources are too thinly spread, they lack the potential to make any visible impact.
Due to this reason, many Review Committees have suggested pruning down the
numbers of CSSs.

19.4.3 State Finance Commissions

State Finance Commissions (SFCs), though are also required to be constituted
every once in five years, are not constituted regularly on time. As a result, while
Kerala and Sikkim are two States where 5th SFCs have submitted their Reports,
for some States (e.g. Maharasthra, West Bengal, Karnataka, and Haryana), 4th
SFCs have submitted their Report. Further, general assessment on SFCs is not
rosy. Their ToRs are ambiguous and Action Taken Reports (ATRs) are not
prepared by the States in time. ATRs are also lukewarm on the recommendations
made by the SFCs. SFCs suffer from staff shuffling and data not being made
available to SFCs by State departments. As a result, Central Finance
Commissions, which should make its recommendations to each State based on
recommendations of the SFCs, do not get their reports on time.
Check Your Progress 3 [answer within the given space in about 50-100 words]
1) What considerations are kept in mind by FCs while deciding on horizontal
allocation of States’ portion of divisible pool funds?
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2) Illustrate the procedure to decide the amount of grants-in-aid to be given to a
State.
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in India
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3) What is the concept of ‘centrally sponsored scheme’ (CSS)?
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4) Comment on the state of functioning of SFCs in India.
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19.5 LET US SUM UP

The Unit has outlined the idea of political federalism whereby some States come
together to form a Union of States. In such cases, both the levels of government
enjoy measure of autonomy for making laws and incurring public expenditure.
The respective area of functional domain are delineated by the Constitution. The
fact that there is a ‘unionist bias’ in the Constitution of India is indicated. A broad
comparison is particularly made between the federal structure of India and the
United States. While fiscal federalism is an unquestionable feature of federal
polities, it is equally applicable in the case of unitary countries as they too can
have two or more levels of governments with some taxation power and
responsibilities needing resources. India has a distinct set of taxes for States and
Union. There are also taxes which are levied and collected by the Union but are
appropriated by States where they are collected. There is a set of taxes whose net
proceeds are to be pooled and shared with the States on the basis of
recommendations made by the Finance Commission (FC). The FC recommends
both vertical and horizontal division of the pool to bridge the revenue gaps arising
in the States. Besides this, the FC recommends ‘measures to augment
Consolidated Funds of States’ to supplement resources of local governments.

19.6 KEY WORDS

Cooperative Federalism : Federalism wherein two or more levels of
government decide to work in cooperation
on some subjects rather than considering
them encroachment on each other’s turf.
Dual Federalism : A theory which suggests that each tier of
government is independent of the other with
respect to subjects allocated to it in the
Constitution.

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Fiscal Federalism Grants-in-Aid : Grants-in-aid of revenue is meant to bridge
the gap between revenue and expenditure of
a government, often from a higher level to a
lower level, without attaching any condition
of sector or matching contribution.
Horizontal Imbalance : When governments in the same hierarchy
have varied differences between their
revenue and expenditure, usually deficits. It
may arise due to differential fiscal capacities
to earn revenue or expenditure requirements
for similar level of activities or both.
Matching Grant : When a grant is provided with the condition
that the grantee has to supplement resources
in the fixed percentage.
Specific Grant : A grant provided to meet expenditure for a
particular sector or project.
Tax Sharing : When proceeds of a tax or pool of taxes is
shared between two different levels of
governments.
Vertical Imbalance : When a government at a higher level, is in
better resource position compared to its
needs to meet allocated tasks, than the
governments at the immediate lower level.
Voting by Feet : When policies, including taxation, may
induce people or businesses to move from
one jurisdiction to another.

19.7 SOME USEFUL BOOKS

1) Hyman, David N., Public Finance: A Contemporary Application of Theory
to Policy, South-Western Santage Learning, Mason. Latest Edition.
2) Anderson, George, (2008) Fiscal Federalism: A Comparative Introduction,
Forum of Federations, Ottawa (also by Oxford University Press).

19.8 ANSWERS OR HINTS TO CHECK YOUR

PROGRESS EXERCISES
Check Your Progress 1
1) See sub-section 19.2.1 and spell out the features giving responsibilities,
resources, powers and authority to States.
2) Local governments have to be constituted by States. However, local
governments have executive wing but not legislative and judiciary. Laws for
them are made by the concerned state. Gram Sabha at the lowest level of
Panchayats and ward Sabha in municipalities are deliberative bodies.
3) Union List provides the items where Union can make law and State List
spells out items on which States have legislative authority.
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4) By the recommendation of the Finance Commission (FC) on tax-sharing and Fiscal Federalism
State FCs for grants-in-aid to be provided to Panchayats and Municipalities. in India

Check Your Progress 2

1) Local governments understand local needs, tastes and preferences better. But
there are functions which have economies of scale and equally desired by
all. They need to be carried out at higher level.
2) Mobile bases with higher level of government and immobile ones with
higher level of government. Likewise, allocation functions better with lower
level of government and distribution and stabilisation function better with
higher level of government.
3) Grants-in-aid are for general purpose while matching grants are specific
purpose attached with the condition of supplementation by the receiving
government. Grant-in-lieu is a compensation for not levying a tax on the
suggestion of a higher level of government.
Check Your Progress 3
1) Population, Area, Income Distance, Forest Cover, Fiscal Discipline, etc.
2) Revenue and expenditure of a State are derived on a normative basis for
each year of the award. State’s share (or States’ portion) of divisible tax
proceeds is added to the revenue of the State. Expenditure minus augmented
revenue is the gap that is set to be met through grants-in-aid.
3) A Centrally Sponsored Scheme is designed by a Union Ministry, is part
funded by sponsoring Union Ministry and part funded by the State. It is
implemented by an agency of the State, often constituted for the scheme.
4) States avoid constituting SFCs in time, keep transferring officials who are
with SFC in ex-officio capacity, either do not have data or do not share data
with SFCs, etc. SFCs take unduly long time in finalising their Report. The
ATRs are also not be prepared in time.

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