A Brave New Design for Centre-State Coordination

In this Indian Policy Collective original, Yamini Aiyar suggests, in 14 points, a design for greater centre-state coordination that can get India through this crisis. 


COVID-19 outbreaks are localised, focused in clusters and in certain districts and states. They necessitate a locally driven, context specific response. The ‘graded lockdown’ to be implemented from April 20th recognizes this, with districts and states set to be colour coded and opened up or locked down depending on the pattern of outbreaks. States are currently at the frontlines of the battle against COVID-19. Key interventions needed are in ‘health’ and ‘social protection’ (reducing poverty and the vulnerability of the poor), which are state subjects. This stands to reason, for states have differing financial and health needs, more so during COVID-19. Areas with large numbers of returning migrants, for instance, may not be able to implement cash transfers through the Jan Dhan Yojana or targeted PDS simply because migrants are unlikely to have the required bank accounts and ration cards. Similarly, for health system capacities, Kerala and Tamil Nadu - both with a thriving public and private health sector - are at different levels of preparedness than Bihar.  - So, rather than impose schemes designed by New Delhi, the central government ought to use its fiscal powers to ease state fiscal constraints by converting its schemes into untied block grants (a single funding window with no predetermined expenditure design) that states can draw from depending on their own perceived needs.  - GoI currently finances health and social protection related activities through two key channels called Centrally Sponsored Schemes (CSS) and Central Sector Schemes (CS). In the FY 2020-21 budget, there were 28 umbrella Centrally Sponsored Schemes (with more than 80 + sub schemes) and 600 Central Sector Schemes. This results in a very fragmented, administratively cumbersome approach to financing, which cannot be responsive to state specific needs. Every budgetary decision needs multiple approvals resulting in inordinate delays. For a disease as dynamic and localised as COVID-19 and for the kind of economic response this necessitates, such a siloed approach will not do.  - So the first and most crucial step of delegation is to delegate design and implementation of interventions to States while the centre takes charge of finances. Of course, capacity differs across states and states will need a lot of technical support. This is where the centre’s focus should be. Enabling states to learn from each other and providing technical capacity where needed - so Bihar can do what Kerala has done! - For this, much smoother coordination between states and between the centre and the states is required.  - Failure to coordinate can lead to disastrous consequences. Recent examples include the tragedy related to handling returning migrants and delays and failures in moving supply chains and essential services (the Chief Ministers of Punjab and Telangana had to request West Bengal via the central government to open up factories to ensure gunny bags needed for agricultural procurement) to delays in the procurement of essential medical supplies like PPE (Personal protective Equipment) and testing kits.  - The best design for better inter-state coordination is a forum akin to the GST council, which can enable deeper deliberation, coordination and consensus building between centre and states.  - Some of us at CPR (Centre for Policy Research) have argued for the creation of a National Empowered Emergency Disaster (NEED) Council. However, unlike the GST council this is envisaged as a political body of CMs, the Prime Minister and other central senior ministers.  - The composition would be similar to the Inter-State Council (ISC) (formed by a Presidential order in 1990, with a vision to support centre-state and inter-state coordination; for the composition of the council, see here). One could also think of a mechanism whereby the ISC functions as the NEED Council in an emergency or disaster scenario, just as the Election Commission of India takes over the administration during an election. The NEED council should be administratively supported by the National Disaster Management Agency and financed through the National Disaster Risk Management Fund which could be redesigned (for this fiscal year and more if needed) as the COVID 19 fund. The fund should operate as a untied grant. The formula for distribution of finances across states should be determined by the NEED Council. - Sub groups within the NEED Council could work in close coordination with the empowered groups set up by the centre to respond to COVID-19. This council would determine agile, need based grant support to states and ensure a smooth flow of resources.  - Also, at this point in time, in dealing with a crisis we cannot let fears of corruption (real as they may be) stymie delivery - this is one of the reasons why states have been resisting universal approach to the PDS and the consequences have been devastating. We need more accountability but this has to be done right. One broad way is to ensure that the NEED council takes on the role of outlining spending plans and presents reports to Parliament (and in the public domain) on performance.  - This is also the time to ensure that the research and civil society community is given the space to do quick surveys and build feedback loops for states and centre to have a better understanding of ground level functioning.  - The NEED council with support from specific ministries could create joint monitoring groups. This has been done for many schemes in the past including MGNREGA which had a multi-stakeholder group (with academics, civil society members and other experts) to regularly provide feedback, in an institutionalised framework. 

- The creation of the IMCTs (Inter Ministerial Central Teams) by the central government, on April 20th, while on the  face of it an important step toward better monitoring and greater transparency to the public, is in fact a step in the direction of deepening centralisation rather than federalism. In its design it fails to accommodate for consultation or participation by the state government and instead empowers the center to issue orders to states in a way that undermines the space for state discretion. Transparency and monitoring while necessary have to be designed in a manner that accomodate for state specific conditions and that built trust between center and states rather than as a forum for central diktats.

- Finally, an important issue that is not getting discussed enough are local governments. These have been the most ignored aspect of our governance system. But in the time of COVID-19 they have begun to play a critical role in providing relief measures at the ground - doing exactly what is needed for a crisis like this. Local governments too need financial support. This would mean ensuring that funds due to them from the 14th Finance Commission and current grants due under the 15th Finance Commission are provided without any delay. Yamini Aiyar is President and Chief Executive of Centre for Policy Research #Centre #State #CentreStateCoordination #YaminiAiyar #India #COVID-19 #clusters #districts #states #gradedlockdown #lockdown #April20th #outbreaks #frontlines #health #socialprotection #poverty #financial #migrants #JanDhanYojana #PDS #bankaccounts #rationcards #healthsystemcapacities #Kerala #TamilNadu #publicsector #privatesector #Bihar #centralgovernment #newdelhi #fiscal #blockgrants #expendituredesign #CentrallySponsoredSchemes #CSS #CentralSectorSchemes #CS #budget #subschemes #budgetary #disease #economicresponse #delegation #design #interventions #technicalcapacity #coordination #supplychains #essentialservices #Punjab #Telangana #gunnybags #agriculturalprocurement #PPE #PersonalProtectiveEquipment #testingkits #GSTcouncil #consensusbuilding #CPR #CentreforPolicyResearch #NationalEmpoweredEmergencyDisasterCouncil #NEEDCouncil #CMs #ChiefMinisters #PrimeMinister #ministers #Inter-StateCouncil #ISC #PresidentialOrder #1990 #ElectionCommissionofIndia #NationalDisasterManagementAgency #NationalDisasterRiskManagementFund #COVID-19Fund #empoweredgroups #corruption #delivery #PDS #accountability #Parliament #publicdomain #civilsociety #surveys #feedbackloops #groundlevelfunctioning #jointmonitoringgroups #MGNREGA #multi-stakeholdergroup #localgovernments #14thFinanceCommission #15thFinanceCommission #original


Image credit - CC-BY-SA 4.0 PlaneMad/Wikimedia


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