Proposes think tank of independent experts, CMs and PM
To align development priorities and resource-sharing between the Centre and states with the dynamic needs of the economy, Prime Minister Narendra Modi on Sunday proposed a “bottom to top” approach in policy planning to be implemented by a think tank of state chief ministers, independent experts and the PM himself.
Modi discussed with state chief ministers in the capital the contours of the proposed modern think tank that would replace the over 60-year-old Planning Commission, which symbolises centralised planning of the Nehruvian era. Modi ruled out incremental steps and called for a total replacement of the Commission, although the last couple of years have witnessed easing of the Commission’s micromanagement of centrally sponsored projects.
Stressing that it was impossible for the nation to develop unless states develop, Modi said states must have a greater role in the think tank and reflect the true spirit of “cooperative federalism.”
“The process of policy planning also has to change from top to bottom to bottom to top,” said a statement issued by the Prime Minister’s Office, quoting Modi. There is a need for the proposed new body, or the council of chief ministers, to design policies for the economic activity that happens outside government set-up, the statement said. “States should have a key role in the new body to replace the Planning Commission,” it said.
In fact, the writing was on the wall as far as the Commission’s future role was concerned — UPA finance minister P Chidambaram’s 2014-15 interim budget acceded to states’ long-standing demand of transferring more funds straight to state treasuries rather than to project implementing agencies.
According to that, of the central assistance for states and union territories, the component of funds that goes straight to state treasuries was trebled to Rs 3.39 lakh crore for 2014-15, from a revised estimate of Rs 1.19 lakh crore in 2013-14. That resulted in funds for key centrally sponsored schemes, including UPA’s flagship schemes on employment guarantee, rural housing, health and education, going to the consolidated funds of the states, rather than to implementing agencies. The number of centrally sponsored schemes has also come down to 67, and the plan is to further reduce their count.
Chidambaram’s interim budget support for the Central Plan (the component routed through ministries via the commission) was slashed to Rs 2.17 lakh crore from Rs 3.56 lakh crore. Arun Jaitley, who succeeded Chidambaram, followed the same pattern in his maiden budget on July 10.
Modi wants to do away with the system of Planning Commission’s five-year macro targets and resource allocation schemes being executed through the union budget. The Commission’s primary function is to determine the (quantum) allocation of Plan funds out of the the gross budgetary support it receives to states, as opposed to the Constitutionally mandated role for the Finance Commission that evolves the formula for sharing of central tax receipts with states.
Sunday’s meeting was attended by most chief ministers. The few who could not participate were represented by their finance ministers or senior officers.
Finance minister Arun Jaitley, who briefed reporters after the meeting, said there was consensus that an alternative to the Commission was needed. “States have broadly responded in favour of strengthening their ability to deliver, for which they need more flexibility rather than a system of command and control,” said Jaitley. He said there was consensus about the need to decentralise both power and planning.
“The requirement of each state is different and they know what suits them better. Therefore, the strategy is to empower states. There cannot be a universal scheme that fits all,” said the finance minister.