What Happened
- Several government schemes — both Centrally Sponsored Schemes (CSS) and Central Sector Schemes (CS) — are likely to continue in their present form beyond April 1, 2026, as ministries are still reviewing and rationalising them
- The review is part of the mandatory five-yearly appraisal aligned with the 16th Finance Commission cycle beginning April 1, 2026
- A total of 54 CSSs and 260 CSs have their terminal approval date of March 31, 2026 and are due for re-appraisal
- The Department of Expenditure, Ministry of Finance has mandated that no CSS or CS will be considered for continuation without a third-party evaluation validating its impact and relevance
- Ministries were required to complete evaluation studies by July 2025 and obtain Expenditure Finance Committee (EFC) approval before the budget-making process
Static Topic Bridges
Centrally Sponsored Schemes (CSS) vs Central Sector Schemes (CS)
India's fiscal architecture distinguishes between two categories of Central government schemes based on their funding pattern, implementation agency, and constitutional basis. Centrally Sponsored Schemes are implemented by state governments with shared funding (Centre and states), while Central Sector Schemes are 100% funded and implemented by the Central government directly.
- CSS: Jointly funded by Centre and states (typical ratios: 60:40 or 75:25 for general states; 90:10 for North-Eastern and hill states); implemented by states; cover subjects in State and Concurrent Lists
- CS: 100% funded by the Central government; implemented by central ministries or their agencies; cover subjects in the Union List
- Constitutional basis for CSS: Article 282 allows the Union or a State to make grants for any public purpose, even on subjects not in their legislative domain
- Total allocation: CSSs constitute approximately 23% of total fiscal transfers to states
- Major CSSs include: MGNREGA, PMAY (Housing for All), Samagra Shiksha, National Health Mission, Jal Jeevan Mission
- Major CSs include: PMGSY (road construction), PM-KISAN (income support), National Pension Scheme
Connection to this news: The ongoing review of 54 CSSs and 260 CSs reflects the regular five-yearly appraisal process, but the delay beyond the April 1 deadline signals the complexity of rationalising overlapping schemes while managing state government expectations on fund-sharing arrangements.
16th Finance Commission — Tax Devolution and Fiscal Federalism
The 16th Finance Commission, constituted on December 31, 2023 under Article 280 of the Constitution, was chaired by Arvind Panagariya. It submitted its report to Parliament on February 1, 2026, recommending the distribution of tax revenues between the Union and states for the period 2026-27 to 2030-31. The Commission recommended maintaining states' share in the divisible pool of central taxes at 41%, the same as recommended by the 15th Finance Commission.
- Article 280 mandates the President to constitute a Finance Commission every five years (or earlier)
- The Commission recommends: (a) distribution of net tax proceeds between Centre and states; (b) principles for grants-in-aid; (c) measures to augment funds for panchayats and municipalities
- 16th FC Chairman: Arvind Panagariya; members include Ajay Narayan Jha, Annie George Mathew, Niranjan Rajadhyaksha, Soumya Kanti Ghosh
- States' share: 41% of divisible pool (same as 15th FC recommendation)
- The Consolidated Fund of India (Article 266) is the source for all grants and devolution
- The EFC (Expenditure Finance Committee) appraises individual scheme proposals before Cabinet approval
Connection to this news: The April 1, 2026 deadline for scheme continuation coincides with the start of the 16th Finance Commission cycle. Scheme rationalisation must align with the Commission's fiscal framework, as the funding pattern for CSSs directly affects Centre-state fiscal relations and the fiscal deficit trajectory.
Scheme Rationalisation and DMEO's Role
The Development Monitoring and Evaluation Organisation (DMEO) under NITI Aayog plays a central role in evaluating CSSs for continuation. For the 260 Central Sector Schemes, third-party agencies selected by the respective ministries conduct assessments. The rationalisation exercise aims to merge overlapping schemes, discontinue underperforming ones, and improve outcome-based monitoring.
- DMEO was constituted in September 2015 by merging the erstwhile Programme Evaluation Organisation (PEO, est. 1952) and the Independent Evaluation Office
- DMEO evaluates all 54 CSSs using a standardised framework covering design relevance, process efficiency, outcome effectiveness, and sustainability
- The government has been progressively reducing the number of CSSs: from 147 in 2014 to 54 (grouped under 28 umbrella schemes) by 2021
- FRBM Act, 2003 mandates fiscal deficit targets; scheme expenditure directly impacts fiscal consolidation
- The finance ministry has directed all departments to merge similar schemes and discontinue those not achieving desired outcomes
Connection to this news: The requirement for mandatory third-party evaluation before any scheme continues beyond March 2026 represents a strengthening of outcome-based governance, though the delay in completing all evaluations highlights the challenge of reforming India's sprawling scheme architecture within tight timelines.
Key Facts & Data
- Schemes due for re-appraisal: 54 CSSs + 260 CSs (terminal date: March 31, 2026)
- 16th Finance Commission period: 2026-27 to 2030-31
- States' share of divisible pool: 41% (16th FC recommendation, same as 15th FC)
- CSS reduction: 147 (2014) → 54 grouped under 28 umbrella schemes (2021)
- CSSs as share of fiscal transfers to states: ~23%
- Evaluation body for CSSs: DMEO under NITI Aayog
- EFC approval required before budget-making process
- Article 280: Constitutional basis for Finance Commission
- Article 282: Constitutional basis for CSS grants