azadi ka amrit mahotsav: The right way to revolutionise fiscal transfers from the Centre to states

Centrally sponsored schemes (CSS) contribute considerably to fiscal transfers from the Centre to states. In 2021-22, Rs 3.8 lakh crore was launched to states beneath CSS, accounting for 20% of the full fiscal transfers. CSS funds are launched by the ministry involved to the state governments’ accounts within the Reserve Financial institution of India (RBI). Many research and audit reviews have underscored a number of considerations within the movement and utilisation of those funds.

As no time restrict was prescribed for launch of funds from state treasuries to implementing companies (IAs), the fund switch was based mostly on liquidity place and priorities of the state governments. Fund flowed to greater than 18 lakh IAs from the state to the village stage. The absence of separate heads of account for the central and the state share in state budgets had made monitoring of the state share contribution a herculean job.

The finance ministry has put in place a web-based public monetary administration system (PFMS) built-in with banks and state treasuries. By way of an expenditure-advance-transfer (EAT) module, PFMS captures monetary info from IAs too. Nevertheless, information alternate between PFMS and state treasuries was irregular. Data on fund utilisation by IAs was not forthcoming both. Solely 4% of them have been importing info within the EAT module.

For more practical money administration and enhancing transparency and effectivity in launch and utilisation of funds, the Division of Expenditure notified a brand new process for launch of funds beneath CSS on March 23, 2021. Referred to as the ‘SNA Mannequin’, the brand new rulebook got here into impact from July 1, 2021. It marked a paradigm shift in the best way CSS function.

The SNA Mannequin requires states to inform a single nodal company (SNA) for every CSS. Each SNA must open an account in a business financial institution. All IAs down the ladder are to both function straight from the SNA’s account or open zero-balance subsidiary account with drawing limits set by SNA. IAs have been additionally directed to switch the funds obtainable of their accounts to SNA.

Beneath the SNA Mannequin, too, funds are launched by central ministries to state governments’ accounts in RBI. Nevertheless, a time restrict of 21 days and 40 days has been prescribed for switch of the central and the state share, respectively, from the state treasury to SNA.

Subsequent instalment to the state may be launched solely after switch of earlier central releases from the state treasury to SNA and utilisation of 75% of the central share and the commensurate state taken collectively. Apart from, the brand new process mandates that in a single instalment, the central ministries shall not launch greater than 25% of the funds more likely to be supplied to a state through the monetary 12 months.

The SNA Mannequin additional ensures a decent monitoring of availability and utilisation of funds by mandating that CSS funds shall keep solely within the SNA account. Curiosity earned is mirrored in PFMS and is to be remitted to the respective consolidated funds as per the fund sharing ratio. All SNAs and IAs are to make use of the EAT module or combine their techniques with PFMS. Financial institution accounts of all SNAs and IAs are onboarded on PFMS.

Mixed and concerted efforts of central and the state governments have firmly established the SNA Mannequin, which has been adopted by all of the states. With implementation of parentchild accounts, float has declined sharply with consequent discount in price of funds to the federal government. Funds keep in simply 3,074 financial institution accounts now. Scheme-wise and state-wise funds obtainable with SNAs is seen to stakeholders. As on June 3, 2022, SNAs had Rs 1,15,923 crore of their accounts.

Expenditure incurred by 9.77 lakh IAs onboarded on PFMS is obvious too. PFMS additionally informs the central ministries in regards to the central share launched to a state however not launched by the state to SNA in addition to in regards to the excellent state share.

Since expenditure on a CSS in a state is being made out of a single checking account, submission of utilisation certificates has change into straightforward. Transparency in fund movement and setting of closing dates has dampened the tendency of states to retain CSS funds.

Data on curiosity accrued in SNAs’ accounts is obtainable to stakeholders, too. In 2021-22, curiosity of Rs 259 crore was credited to the SNAs’ accounts. Furthermore, since central releases are actually based mostly strictly on the knowledge obtainable in PFMS, the info alternate frequency between state treasuries and PFMS has soared. The SNA Mannequin can be producing invaluable information to help policymaking, budgeting and scheme value determinations.

As part of celebration of ‘Azadi Ka Amrit Mahotsav’, the finance minister will launch SNA dashboard on June 7. The dashboard will present complete, real-time image of launch, expenditure, account stability, curiosity earned, and many others. to the scheme managers and resolution makers. Though so much has been achieved, extra must be finished to additional enhance customers’ expertise, optimally utilise the info obtainable in PFMS, and construct further options. Nonetheless, the SNA Mannequin is poised to revolutionise public monetary administration in India and can immensely contribute to the Prime Minister’s imaginative and prescient of a Digital India.

(The author is further secretary in division of expenditure, finance ministry)