THE CENTRE IS planning to roll out a new mechanism that would remove the floating of funds for centrally sponsored schemes (CSS) with state treasuries and state-level nodal agencies. This would let the Centre cut interest costs by ensuring that borrowings are undertaken just in time to meet the actual requirement of fund release.
Currently, interest payments by the Centre are nearly half of its net tax revenue. And at any given point of time, 1.5-2 trillion of central funds lie with state treasuries/agencies.
According to the plan, the Centre will require each state agency to open an account with the Reserve Bank of India (RBI), which will be authorised by the Centre and the states concerned to release the funds after instruction from the Centre.
Currently, the Centre transfers funds for CSS to state treasuries, and states in turn transfer these along with their own shares, typically 40%, to the implementing agencies.
However, many states delay the transfer of central funds and their shares to the agency accounts, causing the funds to lie idle.
This story is from the November 17, 2023 edition of Financial Express Mumbai.
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This story is from the November 17, 2023 edition of Financial Express Mumbai.
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