Central schemes must pass “effectiveness” test with “positive outcomes” to continue beyond this year: FinMin

Union government to continue funded schemes based on positive outcomes, sunset dates, and financial limitations for effective governance.

Schemes that are fully or partially funded by the Union government will only be continued beyond the current financial year if the “evaluation report for the scheme shows positive outcomes”, proving that it has been “effective” in achieving its set objectives, and if there is a clear need to “continue the scheme in view of its mandate performance or scaling up of targets”, according to Finance Ministry circular issued on June 6.

To “improve the quality of government expenditure, every scheme should have a sunset date,” the circular said.

The government is currently in the process of conducting a third party evaluation of all fully funded Central Schemes, while Niti Ayog is appraising the Centrally Sponsored Schemes. There are 54 Central schemes and 260 Centrally sponsored schemes whose approvals end on March 31, 2026 and are likely to be submitted for re-appraisal. A majority of these will also require fresh approval from the Union Cabinet.

These schemes cover a wide gamut, from social sectors like health, women and child development, school and higher education, and tribal welfare to sectors like agriculture, urban and rural infrastructure, water and sanitation, environment, and scientific research.

Apart from a “sunset date”, the government has also proposed other financial limitations. The total projected outlay of a continuing scheme for five years over the 16th Finance Commission (FC) cycle should not ordinarily be more than 5.5 times the average of annual expenditure made between the financial years of 2021-22 and 2024-25, the Finance Ministry circular said.

Instead, another scheme requiring less expenditure could be proposed. “The ministry and department will have the flexibility to seek more funds for a scheme with commensurate reduction in another scheme based on specific justification. All schemes will operate as Fund limited schemes which means that the total sanctions over the FC cycle must not exceed the approved outlay,” the circular added.

Such limitations also extend to demand-driven schemes, such as the flagship Mahatma Gandhi National Rural Employment Guarantee Act scheme, better known as MGNREGA. “The outlay shall be determined based on the approximate number of beneficiaries to be covered in a Finance Commission cycle and sanctions shall be restricted to the approved outlay with a flexibility to carry forward any committed expenditure within the approved outlay to the next cycle.”