Managing COVID-19 crisis: Funding the states will be the key

The Centre is yet to suspend or postpone different wasteful or unnecessary expenditure

Photo courtesy- social media
Photo courtesy- social media


With Health, Agriculture and Social Welfare being all ‘State subjects’, in other words the states being responsible, state governments are at the frontline of the battle against COVID-19. And funding the state governments adequately in the next few months will determine how well or how poorly we manage to cope with the crisis.

But the existing architecture for sharing funds between the Centre and the states are weighed in favour of the Centre, allowing it to be both profligate and arbitrary. There are as many as 600 Central Sector schemes alone besides the Centrally Sponsored Schemes.

They deny flexibility and autonomy to the states while putting an economic burden on the states as well, which must perforce share a part of the expenditure. For the Centrally Sponsored Schemes, states are required to con- tribute up to 50% for supplementary nutrition and 40% for the National Health Mission.

Not only is the ability of states to generate revenue limited, the cen- tralised, one-size-fits-all approach by the Centre denies flexibility to the states. Challenges posed by COVID-19 will not be uniform across the states and will affect different areas, sec- tions of the population and localities will require the states to pursue localized policies and expendi- ture. They will require the freedom to act.

Tension between the Centre and the states is already visible. While the Centre has abrogated the right to dictate policies to the states and decide how much each state would receive and for what, it provides no explanation to why the states’ share of the Goods and Services Tax ( GST) have been held back. The skewed nature of the fiscal relationship between the Centre and the states was highlighted in the manner in which the Centre ‘ordered’ the states against purchasing COVID- 19 test kits and Personal Protective Equipment (PPE) for medical professionals.

The master-subordinate relationship was also evident in the notification that contributions to the PM CARES fund would be eligible to be deemed as expenditure under Corporate Social Responsibility but similar contributions to the Chief Ministers’ Relief Fund would not. There is, unfortunately, no time to be lost. Both the Centre and the states must come together to fight the challenges in the next few months.

Healthcare, food and cash are what the people will need immediately. And states need to have access to more funds than they currently have. For the next six months, therefore, the states should be given access to 100% of the funds available for Health and Nutrition. The Centre is yet to suspend or postpone different wasteful or unnecessary expenditure.

There is no justification for going ahead with the move to have a grand, new Parliament building and a new house for the Prime Minister at this juncture and allocate a whopping Rs 20,000 Crore for it over the next four years. When Defence Budget is being curtailed, it is not understood why the vanity project of re-developing the Central Vista is still going ahead.

The Centre must also pay heed to the suggestion that the National Health Mission budget (34,115 Crore) be augmented by transferring funds from Pradhan Mantri Awas Yojana, Swachh Bharat Mission, Jal Jeevan Mission and Pradhan mantri Gram Sadak Yojana. w Non-salary compo- nents of the centrally sponsored schemes need to be transferred urgently to NHM for onward disburs- al to the states.

Several state governments have set up community kitchens, expand- ed mid-day meal schemes and have undertaken various other pro- grammes to supply food and essential ration to the people following the lockdown. They will require addi- tional funding and sooner t he better. The Prime Minister’s interaction with chief ministers should have been devoted to finalising a new architecture of funding the states. But unfortunately the opportunity was lost in platitudes.

Follow us on: Facebook, Twitter, Google News, Instagram 

Join our official telegram channel (@nationalherald) and stay updated with the latest headlines