The dismal case of slashing schemes and cutting funds

(GS-III: Indian Economy)

In News:

The Union government has discontinued, subsumed, revamped or rationalised over 50% of existing central government-sponsored schemes over the past three years.

Rationalisation of schemes:

Union Ministry of Women and Child Development, there are just three schemes now out of 19 schemes, i.e.,

Mission Shakti,

Mission Vatsalya,

Saksham Anganwadi and Poshan 2.0.

Mission Shakti itself replaced 14 schemes which included the ‘Beti Bachao, Beti Padhao’ scheme.

Under the Ministry of Animal Husbandry and Dairy, just two schemes remain out of 12.

Additionally, the Ministry has ended three schemes which include Dairying through Cooperatives, National Dairy Plan-II, etc.

Under the Ministry of Agriculture and Farmers’ Welfare, there are now three out of 20 (Krishonnati Yojana, the Integrated Scheme on Agricultural Cooperatives and the Rashtriya Krishi Vikas Yojana).

While there is little information on the National Project on Organic Farming or the National Agroforestry Policy.

Reasons behind rationalisation:

15th Finance commission has recommended the rationalisation of CSS schemes.

It results in the optimum utilisation of available resources and better outcomes with area-specific interventions.

Promotes wider reach among targeted groups.

Greater autonomy in fiscal space for states.

Challenges to existing schemes: For schemes that exist, there are challenges such as funding cuts, disbursement and utilisation of funds.

The utilisation of funds: As of June 2022, ₹1.2 lakh crore of funds meant for central government-sponsored schemes are with banks which earn interest income for the Centre.

For instance, under the Nirbhaya fund (2013) ₹1,000 crores were allocated to the fund annually (2013-16) and remained largely unspent.

Funding cuts: The allocation for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) went down by approximately 25% in the FY22-23 Budget.

Even the fertiliser subsidy given by the government is on the decline.

Allocation for NPK fertilisers (nitrogen, phosphorus, and potassium) was 35% lower than the revised estimates in FY21-22.

Funding for wildlife habitat development under the Ministry of Environment, Forest and Climate Change has declined: from ₹165 crores ( FY18-19) to ₹87.6 crores (FY20-21).

Disbursement issue: for Accredited Social Health Activists (ASHA), who are the first responders, there have been delays in salaries for up to six months.

Issues with budget cuts and underutilisation of funds:

Turning down of scheme: A variety of women-focused development schemes across States are being turned down or ended.

Increased rural distress: The Economic Survey 2022-23 has highlighted that demand for the scheme was higher than pre-pandemic levels as rural distress continues.

Fertiliser shortage: Reduction in subsidies, when fertiliser prices have risen sharply after the Ukraine war, has led to fertiliser shortages and farmer anguish.

Raises question on India’s climate targets: A pertinent question is about meeting climate change obligations in the face of funding cuts.

Decline in confidence: Anecdotal cases show that actual funding disbursal for MGNREGA has often been delayed, leading to a decline in confidence in the scheme.

Way forward:

Rather than downsizing government schemes and cutting funding, one should right-size the government.

Providing flexibility to State governments to ensure that the schemes benefit the targeted groups since they implement the schemes.

Involving stakeholders before the restructuring of the CSS.

Decentralisation of decision-making in schemes so as to overcome inefficient administration.

Addressing the disbursal problems, releasing sanction orders and underutilisation of funds problem.

Capacity building for an efficient bureaucracy to meet today’s challenge.

Conclusion:

Rather than having a target of fewer government schemes, we should raise our aspirations towards better public service delivery.

An income tax lesson for GST

(GS-III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment)

In News:

Under the faceless tax regime, information about high-value transactions of taxpayers is received by the tax department which is then used to issue notices under section 148 of the IT Act.  Recently, thousands of such notices were issued and taxpayers had to pay tax, interest and penalties.

What is the faceless assessment scheme for Income Tax?

The faceless assessment scheme was launched in 2020 with the objective of promoting an efficient and effective tax administration, minimizing physical interface, increasing accountability and introducing team-based assessments.

The scheme lays down the procedure to carry out a faceless assessment through electronic mode.

Significance:

• An important aspect of the faceless tax regime is that even the first appellate authority — the Commissioner of Income-Tax (Appeals) — is now faceless, leaving no room for corruption.
• The faceless tax assessment system has put everything online — from the filing of returns to assessment orders.
• It has even done away with the need for huge storage facilities for the records of taxpayers.

If the faceless tax regime for direct taxes has resulted in significant benefits, the main drawback of GST (indirect tax) is that it remains face-to-face. The same faceless system can be used to rationalize of GST regime and make it more efficient.

The Goods and Services Tax (GST) has come into effect in India (2017), bringing an end to the era when traders and businessmen had to pay a host of different indirect taxes — excise duty, VAT, sales tax, service tax, octroi — at the same time.

Should governments sell liquor and run lotteries?

(GS-II: Government policies and interventions for the development of various sectors and issues arising out of them etc)

In News:

Kerala Governor recently criticized the State government for relying heavily on liquor and lottery to generate revenue.

Should the government sell sin goods? No!

The role of the state is to provide public goods: The consumption of sin goods is instead linked with ‘public bad’.

Negative effects of sin goods: Disproportionately impact the weaker sections of society.

Public health concern: The rising demand for alcohol is a public health concern

Revenue-maximizing objective: It takes precedence over the public interest.

How can the state play a positive role?

Raising the tax rates and prices of sin goods: It will discourage people from consuming them in the long run.

Developmental programmes: Taxes collected from a significant source can be used for development programmes.

Why is the State government increasingly dependent on taxes from sin goods?

In 2019-20, Own tax revenues, collected by the States, accounted for only 43.5(forty-three point five)% of the total revenues of all States/UTs combined.

Financial devolution: State governments are heavily dependent on financial devolution from the Center.

There are only a limited number of goods and services, mainly alcohol and petroleum products, on which the State governments can independently set tax rates.

Limited autonomy: The States enjoy limited autonomy in raising financial resources.

Way forward:

Measures to limit the consumption of tobacco: It should go hand in hand with steps for providing alternative livelihood opportunities for those engaged in tobacco farming and processing.

It is important to deploy other instruments too such as public campaigns against the abuse of intoxicants.

There is a limit to control demand simply through sin taxes: Government need to take lessons from the Temperance movement.

Temperance movement(1880s): It was the lower castes and tribes’ movement against the role of the British Imperial state in encouraging the sale of alcohol.

100 years of Saka Panja Sahib

In News:

October 30, marks 100 years of the Saka Panja Sahib incident.

What is Saka Panja Sahib incident?

On October 30, 1922, the Saka was about to stop the train and serve Langar to hungry Sikh prisoners of Guru Ka Bagh Morcha, who were taken to Attock for two and half years of Imprisonment.

The station master informed that the train won’t stop there and as a result, Sikhs protested by lying on railway tracks.

Bhai Karam Singh & Bhai Partap Singh Attained martyrdom in this incident.

Since then, both Sikhs are hailed as martyrs of Saka Panja Sahib who sacrificed their lives fighting for the rights of Sikhs against the British.

Gurudwara Panja Sahib:

The history of the shrine Gurdwara Panja Sahib, in Hasan Abdal of Pakistan, is far older than the Saka Panja Sahib incident.

Maharaja Ranjit Singh and his general Hari Singh Nalwa got the gurdwara building constructed to commemorate Guru Nanak and his companion Bhai Mardana’s visit to the above site.