Appraisal of CSSs and CSs Ahead of the 16th Finance Commission Cycle

Brief Context

In News The Department of Expenditure, Ministry of Finance has initiated a comprehensive exercise to appraise and approve Centrally Sponsored Schemes (CSSs) and Central Sector Schemes (CSs) for continuation post March 2026. About The foundation of this appraisal exercise lies in the 2016 Union Budget, which formally introduced the policy of assigning a sunset clause and outcome-based evaluation for every centrally funded scheme. The goal was to ensure that no scheme continues indefinitely withou

Source Content

Syllabus: GS2/ Governance

In News

• The Department of Expenditure, Ministry of Finance has initiated a comprehensive exercise to appraise and approve Centrally Sponsored Schemes (CSSs) and Central Sector Schemes (CSs) for continuation post March 2026.
  • This aligns with the 16th Finance Commission cycle starting 1st April 2026.

About

• The foundation of this appraisal exercise lies in the 2016 Union Budget, which formally introduced the policy of assigning a sunset clause and outcome-based evaluation for every centrally funded scheme. 
• The goal was to ensure that no scheme continues indefinitely without proven effectiveness and relevance.
• For Centrally Sponsored Schemes (CSSs), the Development Monitoring and Evaluation Organisation (DMEO) under NITI Aayog is responsible for conducting evaluations.
• For Central Sector Schemes (CSs), the concerned ministries select third-party agencies to assess outcomes and performance.

Significance of the Reappraisal Exercise

• Outcome-Driven Governance: Aligning schemes with measurable outcomes through third-party evaluations ensures evidence-based policymaking.
  • It eliminates continuation of underperforming or redundant schemes.
• Fiscal Consolidation and Optimal Resource Use: Helps contain revenue expenditure and create fiscal space for capital-intensive projects.
  • Example: Capital expenditure for FY 2025–26 (BE) stands at ₹11.21 lakh crore, enabled by similar rationalisation in the past.
• Scheme Convergence and Efficiency: Integration of overlapping schemes reduces duplication, administrative costs, and enhances synergies (e.g., health + nutrition + WASH).
• Digital Targeting and DBT Integration: Linking schemes with universal Aadhaar-based DBT enhances transparency, reduces leakages, and ensures last-mile delivery.
• India @100 Vision Alignment: Facilitates policy alignment with long-term developmental goals such as infrastructure, health, education, and innovation.

Challenges in Recalibrating Schemes

• Political and Federal Sensitivities: States may resist merger or closure of schemes due to regional priorities or electoral concerns.
  • CSSs often involve shared finances—creating friction over cost-sharing ratios.
• Institutional Inertia and Bureaucratic Resistance: Ministries may be reluctant to let go of legacy schemes due to vested interests or fear of budget cuts.
• Evaluation Limitations: Quality and neutrality of third-party evaluations vary; some schemes lack robust data for review.
• Implementation Gaps: Even well-designed schemes fail due to weak implementation capacity, especially at district and local levels.
• Transition Risks: Phasing out schemes without adequate transition planning may disrupt service delivery.

Way Forward

• Strengthen Evaluation Frameworks: DMEO-NITI Aayog and Ministry-appointed agencies must adopt uniform standards, real-time MIS integration, and participatory evaluation.
• Foster Centre-State Coordination: Transparent dialogue and incentive-based funding to secure state buy-in for scheme redesign.
• Digital Infrastructure for Scheme Monitoring: Expand platforms like PFMS and JanSamarth to track disbursements, outputs, and impact.

Source: TH