Fifteenth Finance Commission (FFC) Chairman NK Singh, on December 11, suggested that the government should set up committees to revisit the Seventh Schedule and Article 282 of the Indian Constitution.
Addressing the annual general meeting of industry body FICCI, Singh also said a mechanism needs to be created for constant dialogue between the Centre and states on various issues, to fill a vacuum left by the abolition of the Planning Commission.
“There is a need for a forum for ongoing consultative dialogue after the abolition of the Planning Commission. With the abolition of the Planning Commission, many economists and policymakers have argued about an institutional vacuum. States have pleaded for a credible institution acting as a link for a policy dialogue with the Centre,” Singh said.
The Seventh Schedule of the Constitution divides subjects broadly into the Union, State, and Concurrent list. Addressing the virtual event, Singh said that over a period of time, these divisions of function have got eroded.
“I would suggest the constitution of a high-powered committee of domain experts. They must recognise the contemporary context of technology, global interdependence and changes in our national priorities. These necessitate a revisit to the traditional classification of subjects embedded in the Seventh Schedule of the Constitution,” Singh said.
“Second, we need to revisit the entire area of Article 282 of the Constitution. The legitimacy of all centrally sponsored schemes, most of which are in the domain of the states, emanates from the use or misuse of Article 282,” he said.
Article 282 deals with expenditure defrayable by the Centre or a state out of its revenues. The article says the Centre or states may make any grants for any public purpose, notwithstanding that the purpose is not one with respect to which Parliament or the Legislature of the State, as the case may be, may make laws.
Centrally sponsored schemes are paid for by the Centre and states in a pre-determined ratio, while central sector schemes are entirely financed by the Centre.
Singh said there are 211 sub-schemes under the 29 centrally sponsored schemes. “Considering that the states often protest that these schemes are ill designed and not suited to their specific needs and entail significant financial outlays by them, no state has really decided to abandon them.”
“Thus, the centrally sponsored schemes should be flexible enough to allow states to adapt and innovate. We also need a far more credible policy for rationalisation of these schemes and central outlays than have been possible so far. We need to constitute an empowered group of domain experts to work on further and deeper rationalisation of these schemes,” he said.
“We cannot overlook the fact that the total public outlays on these schemes are, maybe, close to Rs 6-7 lakh crore per annum. The central government alone spends over Rs 3.5 lakh crore, which is 1.2 per cent of current GDP, while the rest come from states,” Singhs said, adding that some of these expenditures needed to be cut.
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