Tracking CSS makes it effective, don’t link it with GST
Though no explicit statement has been made linking West Bengal’s decision to postpone its assembly approving the GST Bill, chief minister Mamata Banerjee is upset with what she feels is an attempt by the Centre to monitor the state’s spending and appoint someone to keep tabs on the state’s treasury.
This follows NITI Aayog putting out an office memo asking for the public financial management system (PFMS) to be integrated with state treasuries.
But none of this was done by subterfuge, it was based on the report of a sub-group of chief ministers set up in March 2015—to rationalise the centrally sponsored schemes (CSS)—under the Madhya Pradesh chief minister, the report was submitted in October 2015 and was sent to all states after it was finalised.
NITI Aayog’s memo just echoes what the report recommended—that the Centre would release funds quickly based on the last-to-last utilisation certificate, the plan would be to move to just-in-time release of cash on a quarterly basis, states would not be penalised for delaying releasing funds to implementing agencies, linking of treasuries would be done by FY17 though that would not be a condition-precedent for releasing funds and that NITI would independently monitor the progress of CSS.
The purpose of the linking treasuries is just a monitoring tool so, when an evaluation is done, it is easier to see where the problem occurred—it also allows certificates and monitoring reports to be uploaded electronically.
While states are free to spend funds as they wish and on whichever CSS they like, theoretically, the problem arises if NITI finds a state has done a bad job—presumably that’s what’s upsetting Banerjee and other states may take a cue from her.
Since any evaluation—and hence any possible action based on that—will have to go to NITI’s Governing Council where the states are well-represented, it’s difficult to see where the problem is. After all, it is in both the Centre and the states’ interest that CSS be well-implemented and that states learn from each others’ mistakes/successes.
Linking this to the GST process where the state’s finance minister is a key figure, sadly, also makes the optics look terrible.