A major restructuring of centrally sponsored schemes (CSS) is on the cards when fund allocations are finalised in Budget 2012, as the government is hard pressed to keep deficit numbers in check.

Various schemes that are either in conflict with other operational CSS or where allocations are low would likely be merged or phased out. The idea is to prevent these schemes from becoming a drain on the exchequer, putting pressure on the ministries to refrain from launching populist schemes and improving administration of the limited number of programmes so that beneficiaries could be targeted better.

The CSS are special programmes run by central ministries and administered by state governments. While the Centre provides funds for these schemes from its gross budgetary support (GBS), states also pitch in with a portion of the funding. The share of all CSS as a percentage of GBS has increased continuously in the last three Plans. In the 11th Plan it went up to 41.59% (CSS provision of R6,60,506.40 crore) as against 38.64% in 10th Plan, and 31% in the Ninth Plan. The government now wants to bring down this share to close to 35% during 12th Plan.

?The Planning Commission has already initiated talks with central ministries and states to restructure CSS so that a definite strategy is unveiled in the forthcoming Budget. It will also set the tone for the 12th Plan, which will start from April 2012,? said an official. ?The axe is likely to fall on schemes that have low allocation of R100 crore or less, while some others could be merged with existing flagship schemes to prevent problems in administering the scheme and make programmes more focused,? the official added.

The trigger for the exercise is Cabinet clearance to the Food Security Bill, which is likely take the government?s food subsidy burden to about R1 lakh crore. It is felt that there should be few large schemes that cover the number of smaller schemes that are operational now. Already, there is a proposal to merge benefits under flagship schemes such as the mid-day meal and integrated child development services schemes with provisions in the Food Security Bill.

The restructuring strategy is based on inputs from the recommendations of the committee on CSS headed by Planning Commission member BK Chaturvedi. The committee, which has already submitted its report to the PMO, has suggested bringing down operational CSS from 147 to about 59. Even the Rangarajan Panel has suggested reducing the number of CSS as an expenditure-control measure.

Under the restructuring plan, schemes such as as the National Bamboo Mission, National Mission on Seed, Rainfed Area Development Programme, National Project for Cattle and Buffalo Breeding, Fodder Development Programme, Utilisation of Fallen Animals, Project Tiger, National Afforestation Programme, Project Elephant, National Mental Heath Programme, Adult Education and Skill Development Programme, Pre-Matric Scholarship for Minorities, and Provision of Urban Ammenities in Rural Areas may either be merged with a broader scheme or weeded out. The Centre is also likely to offer few schemes to a state if they oppose closure of some CSS. Close to 44% of the total CSS have an average annual outlay of less than R100 crore.

The need for rationalisation of CSS is being felt as government income against expenditure faces big imbalance this year. Against a target to reduce the fiscal deficit level to 4.6% of GDP in 2011-12, the deficit level is expected to shoot beyond 5.5% as per estimates by economists. The global slowdown and fall industrial production growth has added to government worries with the second quarter GDP growth falling to 6.9%. The government is also burdened with higher subsidy this fiscal and an additional borrowing of R53,000 crore has been approved for FY12, taking the Centre?s total borrowing to R4.7 lakh crore from the budgeted level of R4.17 lakh crore.

Though the share of all CSS as a percentage of GBS has increased continuously in the last three Plans, there has been a decline in the number of schemes. The number of CSS during the last three Plans has gone down to 360, 155 and 147, respectively. The number of schemes went down from 155 in 2005-06 to 99 in 2007-08, the beginning of the 11th Plan, thereafter increasing to 147 in 2011-12.

The changes is unlikely to provide major savings for the government as it is unlikely to disturb the nine flagship schemes that constitute almost 80% of the budgetary provisions for all CSS. Of the total CSS provision of R6,60,506.40 crore during the 11th Plan, the nine flagship CSS alone constituted R5,24,465.99 crore, or 79.4% of the spend. The budgetary allocation for CSS in 2011-12 is about R1,88,000 crore.