New Delhi: The Indian government has launched an extensive evaluation and approval process for 54 Centrally Sponsored Schemes (CSSs) and 260 Central Sector Schemes (CSs), set to shape their continuation for the five-year period starting April 1, 2026. This initiative aligns with the 16th Finance Commission cycle (2026-2031) and reflects the government’s commitment to fiscal responsibility and evidence-driven policymaking. Rooted in the 2016 Union Budget’s mandate, this appraisal aims to streamline public spending, eliminate inefficiencies, and ensure schemes align with India’s developmental priorities.
Origin and Purpose of the Appraisal
The 2016 Union Budget established a policy requiring every government scheme to have a sunset clause and undergo an outcome-based review before continuation. This ensures that only impactful schemes are retained, while those that are redundant or have met their objectives are either merged or discontinued. The current process targets 314 schemes—54 CSSs and 260 CSs—whose approvals expire on March 31, 2026. These schemes cover critical areas such as health, education, agriculture, tribal welfare, infrastructure, water, sanitation, and scientific research, making the appraisal vital for India’s development agenda.
Initiating the Review Process
On May 29, 2025, the Department of Expenditure hosted a half-day workshop to launch this comprehensive review. Chaired by Cabinet Secretary Dr. T.V. Somanathan, the event included key officials such as Shri Ajay Seth, Finance Secretary and Secretary of the Department of Economic Affairs, and Shri Vumlunmang Vualnam, Secretary of the Department of Expenditure. Secretaries from various Ministries and Departments also attended, highlighting the collaborative effort required for this exercise.
Dr. Somanathan stressed the importance of rigorous evaluations to refine scheme designs, eliminate overlaps, and discontinue programs that have outlived their relevance or achieved their goals. He emphasized optimizing limited public resources to maximize impact. The Department of Expenditure provided a fiscal overview and outlined indicative norms for determining resource allocations for Ministries during the 16th Finance Commission cycle.
Evaluation Framework and Responsible Agencies
The evaluation process is structured for objectivity and thoroughness. The Development Monitoring and Evaluation Organisation (DMEO) under NITI Aayog is tasked with evaluating the 54 CSSs, while third-party agencies selected by the respective Ministries assess the 260 CSs. NITI Aayog is currently conducting CSS evaluations, with draft reports expected to be shared with Ministries soon. The Ministry of Finance has mandated that no scheme will proceed without a third-party evaluation demonstrating positive outcomes, mandate justification, and performance-based necessity.
Ministry of Finance Directives
The Ministry of Finance has issued strict guidelines to ensure the appraisal aligns with fiscal discipline:
- Mandatory Third-Party Evaluations: No CSS or CS will be considered for continuation beyond March 31, 2026, without a third-party evaluation validating its impact and relevance.
- Evaluation Timeline: Ministries must complete evaluation studies by July 2025 and obtain Expenditure Finance Committee (EFC) approval before the budget-making process begins.
- Realistic Financial Planning: Dr. Somanathan cautioned Ministries against inflated budget projections, advocating for performance-driven and realistic budgeting.
These directives aim to ensure efficient and accountable public expenditure.
Financial Allocations for the 16th Finance Cycle
The appraisal process is closely tied to the financial framework for the 16th Finance Commission cycle. The Department of Expenditure has introduced a formula allocating Ministries 5.5 times their average actual expenditure from 2021-22 to 2025-26, ensuring transparency and predictability in resource distribution.
Some Ministries, such as the Ministry of Health & Family Welfare, have requested additional funds for initiatives like vaccination programs. However, the Cabinet Secretary emphasized the need for realistic budgeting to prevent straining public finances. The FY 2025-26 budget reflects a strong focus on capital expenditure, with an allocation of ₹11.21 lakh crore, building on the success of prior appraisals that significantly increased capital outlay.
Understanding Centrally Sponsored and Central Sector Schemes
Centrally Sponsored Schemes (CSSs)
CSSs are jointly funded by the Central and State Governments in predefined ratios (e.g., 60:40, 75:25, or 90:10) and implemented by State Governments. They cover sectors under the State and Concurrent Lists, such as health, education, and rural development. CSSs are categorized as:
- Core of the Core Schemes: High-priority programs critical to national development.
- Core Schemes: Key initiatives addressing significant developmental needs.
- Optional Schemes: Flexible programs allowing States to tailor implementation.
Examples include the PM Poshan Scheme, providing nutritious meals to schoolchildren, and the PM Awas Yojana (Gramin), supporting rural housing.
Central Sector Schemes (CSs)
CSs are fully funded and executed by the Union Government through its Ministries, Departments, or agencies, typically addressing sectors under the Union List, such as digital infrastructure and manufacturing. Examples include the National Digital Health Mission and the Production-Linked Incentive (PLI) Scheme.
Both CSSs and CSs span a wide range of sectors, from social welfare to infrastructure and scientific research, playing a crucial role in India’s development.
Policy Reforms and Innovations
The appraisal process has highlighted several reforms to enhance public spending efficiency:
- Challenge-Mode Financing: Encouraging competitive funding models to foster innovation.
- Aadhaar-Enabled Direct Benefit Transfers (DBT): Expanding DBT for transparent and targeted benefit delivery.
- Scheme Convergence: Merging overlapping schemes to reduce duplication and improve outcomes.
- Just-in-Time Fund Release: Implementing timely fund disbursal to avoid parking and redirect savings to new or expanding initiatives.
These reforms aim to create a responsive and results-focused public expenditure system.
Significance of the Appraisal
The appraisal process is pivotal for building an efficient public finance system. Its objectives include:
- Eliminating Inefficiencies: Removing redundant or suboptimal schemes.
- Optimizing Resources: Ensuring effective allocation of limited public funds.
- Enhancing Impact: Redesigning schemes to align with national priorities.
- Promoting Accountability: Using third-party evaluations for transparency and performance-based decisions.
This approach reflects a shift toward evidence-driven policy making and fiscal responsibility, supporting India’s sustainable development goals.
Future Outlook
As India prepares for the 16th Finance Commission cycle, the appraisal of CSSs and CSs is a critical step toward a more efficient public expenditure framework. With 314 schemes under review, Ministries must complete evaluations by July 2025 and secure EFC approval. The focus on realistic budgeting, scheme convergence, and innovative financing models underscores the government’s commitment to maximizing resource impact.
This process will shape resource allocation across key sectors, ensuring alignment with India’s developmental priorities. By fostering accountability and efficiency, the appraisal will define the nation’s public finance landscape for 2026-2031.
Frequently Asked Questions (FAQs)
1. What are Centrally Sponsored Schemes (CSSs) and Central Sector Schemes (CSs)?
Centrally Sponsored Schemes (CSSs) are programs co-funded by the Central and State Governments in predefined ratios (e.g., 60:40, 75:25, or 90:10) and implemented by State Governments, covering sectors like health, education, and rural development under the State and Concurrent Lists. They are categorized into Core of the Core, Core, and Optional Schemes. Examples include PM Poshan Scheme and PM Awas Yojana (Gramin). Central Sector Schemes (CSs) are fully funded and executed by the Union Government through its Ministries or agencies, addressing sectors like digital infrastructure and manufacturing under the Union List. Examples include the National Digital Health Mission and the Production-Linked Incentive (PLI) Scheme.
2. Why is the government reviewing 54 CSSs and 260 CSs?
The review, mandated by the 2016 Union Budget, ensures that schemes undergo outcome-based evaluations before continuation beyond their approval end date of March 31, 2026. Aligned with the 16th Finance Commission cycle (2026-2031), the appraisal aims to eliminate redundant or ineffective schemes, merge overlapping programs, optimize public resources, and align schemes with national priorities to enhance the efficiency and impact of public expenditure.
3. Who is responsible for evaluating these schemes?
The Development Monitoring and Evaluation Organisation (DMEO) under NITI Aayog evaluates the 54 Centrally Sponsored Schemes (CSSs). For the 260 Central Sector Schemes (CSs), third-party agencies selected by the respective Ministries conduct the assessments. These evaluations ensure objectivity and provide actionable insights for scheme continuation, redesign, or discontinuation.
4. What are the key guidelines for the appraisal process?
The Ministry of Finance has outlined: (1) No scheme will be continued beyond March 31, 2026, without a third-party evaluation demonstrating positive outcomes and performance-based necessity; (2) Ministries must complete evaluations by July 2025 and secure Expenditure Finance Committee (EFC) approval before the budget-making process; (3) Ministries are urged to adopt realistic budgeting to avoid inflated projections, ensuring fiscal discipline.
5. How will the appraisal impact financial allocations for 2026-2031?
The appraisal is tied to the 16th Finance Commission cycle’s financial framework, with Ministries allocated 5.5 times their average actual expenditure from 2021-22 to 2025-26. The process supports increased capital expenditure, with FY 2025-26 budgeted at ₹11.21 lakh crore. Reforms like challenge-mode financing, Aadhaar-enabled Direct Benefit Transfers, scheme convergence, and Just-in-Time fund release aim to optimize resource use and enhance public spending efficiency.
