Central Sector and Centrally Sponsored Schemes
In India’s system of public expenditure and governance, development programmes and welfare initiatives are implemented through two primary types of schemes: Central Sector Schemes (CSS) and Centrally Sponsored Schemes (CSSs). These schemes are essential instruments for achieving the goals of national planning, fiscal federalism, and socio-economic development across diverse regions of the country. While both categories are financed by the Union Government, they differ significantly in terms of funding pattern, administrative control, and implementation mechanism.
Background and Context
The classification of government schemes into Central Sector and Centrally Sponsored categories evolved after the adoption of planned economic development in India post-independence. The Planning Commission, established in 1950, introduced the concept to distinguish between schemes fully controlled by the Union Government and those implemented with the participation of State Governments.
Following the 14th Finance Commission (2015) and the restructuring of central assistance, the number and nature of such schemes were rationalised to improve efficiency and reduce duplication. The NITI Aayog now plays a central role in coordinating and evaluating both types of schemes.
Central Sector Schemes
Central Sector Schemes are those that are fully funded and implemented by the Government of India through its ministries and departments. These schemes are executed either directly by the central agencies or through central public sector undertakings, autonomous bodies, or designated implementing institutions.
Key Features
- Funding: 100% financed by the Union Government.
- Implementation: Managed by central ministries or their agencies, with minimal or no involvement from state governments.
- Objective: To address subjects that fall within the Union List of the Constitution or require national-level intervention.
- Examples: High-priority national programmes, economic infrastructure projects, and research-based initiatives.
Examples of Central Sector Schemes
- Pradhan Mantri Kisan Samman Nidhi (PM-KISAN): Direct income support to small and marginal farmers.
- Pradhan Mantri Jan Dhan Yojana (PMJDY): Financial inclusion through universal access to banking.
- PM Ujjwala Yojana: Distribution of LPG connections to below-poverty-line households.
- BharatNet Project: Broadband connectivity to rural India.
- National Ganga Plan: Integrated Ganga conservation and rejuvenation programme.
- Atal Innovation Mission: Promotion of entrepreneurship and innovation through NITI Aayog.
Purpose and Advantages
- Ensures uniform national implementation of strategic programmes.
- Facilitates direct transfer of benefits to citizens through DBT (Direct Benefit Transfer) mechanisms.
- Enables the central government to address national priorities, such as digital infrastructure, defence, or research.
Centrally Sponsored Schemes
Centrally Sponsored Schemes (CSSs) are programmes that are jointly funded by the Centre and the States. They are designed by the Union Government but implemented by State Governments or Union Territories, making them a key tool for cooperative federalism. The objective is to achieve national goals while allowing state-specific flexibility in implementation.
Key Features
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Funding Pattern: Shared between the Centre and the States in predetermined ratios.
- For most schemes: 60:40 (Centre:State)
- For North-Eastern and Himalayan States: 90:10
- For Union Territories (without legislature): 100% Central funding
- Implementation: Executed by State or Union Territory administrations as per guidelines issued by the relevant central ministry.
- Objective: To promote welfare and development in areas of joint responsibility under the Concurrent List of the Constitution, such as education, health, agriculture, and rural development.
Examples of Centrally Sponsored Schemes
- Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS): Provides guaranteed wage employment to rural households.
- National Health Mission (NHM): Strengthens healthcare systems and services across states.
- Samagra Shiksha Abhiyan: Integrates school education from pre-primary to senior secondary levels.
- Pradhan Mantri Awas Yojana – Gramin (PMAY-G): Provides housing for rural poor.
- National Rural Livelihoods Mission (NRLM): Promotes self-employment and women empowerment through SHGs.
- Mid-Day Meal Scheme (now PM POSHAN): Nutritional support for school children.
Purpose and Advantages
- Promotes cooperative federalism by sharing fiscal and administrative responsibilities.
- Encourages regional development through state-level adaptation of national policies.
- Strengthens service delivery mechanisms in critical social sectors.
Comparative Analysis
| Aspect | Central Sector Schemes | Centrally Sponsored Schemes |
|---|---|---|
| Funding | Fully funded by the Union Government | Shared between Centre and States |
| Administrative Control | Central Government (ministries/departments) | Jointly by Centre and State Governments |
| Implementation | Directly by central agencies or autonomous bodies | By State/UT governments as per central guidelines |
| Objective Focus | National importance and Union List subjects | Welfare and development of states on Concurrent List subjects |
| Flexibility | Limited flexibility for states | States have operational flexibility |
| Examples | PM-KISAN, BharatNet, PMJDY | MGNREGS, NHM, Samagra Shiksha, PMAY-G |
Rationalisation and Classification of Schemes
Following recommendations from the Sub-Group of Chief Ministers on Rationalisation of CSSs (2015) and the NITI Aayog, schemes were categorised into three broad groups:
- Core of the Core Schemes: Focused on essential social and development objectives (e.g., MGNREGS, National Social Assistance Programme).
- Core Schemes: Represent key national priorities shared with states (e.g., NHM, Samagra Shiksha).
- Optional Schemes: Based on state-specific needs; participation is optional.
This restructuring aimed to reduce the total number of CSSs, increase efficiency, and allow better financial flexibility for states.
Fiscal and Administrative Mechanisms
Funding for both categories of schemes is provided through the Union Budget, under the expenditure heads of relevant ministries. Monitoring and evaluation are conducted by:
- NITI Aayog – for policy alignment and performance evaluation.
- Public Financial Management System (PFMS) – for real-time fund tracking.
- Ministries’ dashboard systems – for data-driven governance.
States are required to submit Utilisation Certificates (UCs) and performance reports to receive subsequent instalments of funds.
Challenges in Implementation
Despite their wide reach and objectives, both Central Sector and Centrally Sponsored Schemes face several implementation challenges:
- Overlapping jurisdictions: Duplication of schemes and lack of coordination between Centre and States.
- Delayed fund release: Administrative bottlenecks affecting timely disbursement of funds.
- Monitoring difficulties: Inadequate evaluation mechanisms in remote regions.
- Regional imbalances: Uneven absorption capacities among states.
- Accountability issues: Misreporting or underutilisation of funds in some cases.
The government has been addressing these issues through digital transparency measures such as Direct Benefit Transfer (DBT) and Integrated Financial Management Systems.
Role in Cooperative Federalism
Both types of schemes exemplify India’s model of fiscal federalism, where responsibilities are shared between different tiers of government to achieve national and regional objectives. Central Sector Schemes embody the principle of national responsibility, whereas Centrally Sponsored Schemes reinforce collaborative partnership with the states.
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