CSS Fund Flow & Last-Mile Delivery
Why in News?
Recently the Parliamentary Standing Committee on Public Grievances, Law and Justice raised concerns about:
- Poor utilisation of funds in Centrally Sponsored Schemes (CSS)
- Even after introducing a new system called SNA-SPARSH (2024)
What is the Core Issue?
India releases welfare money from the Centre to states — but a large chunk sits unused in bank accounts. People don’t get houses built, wages paid, or services delivered — not because money is absent, but because the system of spending it is broken.
Think of it like this: Water reaches the city’s main tank (fund released), but the pipes to individual homes are blocked (last-mile delivery fails).
Key Terms
| Term | Meaning |
| CSS (Centrally Sponsored Schemes) | Central govt schemes where both Centre + State share costs (e.g., PMAY, MGNREGS, Jal Jeevan Mission) |
| SNA (Single Nodal Agency) | One state-level bank account for each CSS, introduced in 2021–22 to consolidate funds |
| JIT (Just-In-Time) Funding | Release money only when it’s about to be used — not in advance — to reduce idle cash |
| SNA-SPARSH | Upgraded system (Jan 2024) that releases Centre + State funds faster and directly to beneficiaries |
| PFM (Public Financial Management) | The system of planning, releasing, tracking, and auditing government money |
| CAG | Comptroller and Auditor General — India’s top auditor of government accounts |
Background: How Did We Get Here?
CSS — Scale of the Problem
- CSS accounts for more than half of all Union-to-State fund transfers
- That’s roughly 1.5% of GDP every year
- Yet as of December 2024, ₹1,60,000 crore of welfare money was sitting unspent in bank accounts
The money was released. The accounts existed. The schemes were active. But nothing moved.
EVOLUTION OF REFORMS
Reforms Done So Far to Improve Fund FlowIndia has taken several steps to fix the problem of idle money:
| Year/Period | Reform | What it did |
| 2014-15 | Rationalisation of CSS | Reduced number of schemes; funds routed through State Consolidated Fund for better legislative oversight |
| 2021-22 | Single Nodal Agency (SNA) | All funds for one scheme in a state go to one single bank account instead of many accounts |
| January 2024 | SNA-SPARSH (Just-in-Time funding) | Upgraded SNA system; releases money directly and faster to beneficiaries or implementing agencies only when needed (like real-time/just-in-time payment) |
SNA-SPARSH integrates:
- Public Financial Management System (PFMS)
- State Integrated Financial Management Information System (IFMIS)
- RBI’s e-Kuber
Benefits of SNA-SPARSH:
- Reduces idle funds sitting in banks.
- Lowers states’ short-term borrowing costs.
- Improves transparency and budget forecasting.
- Centre and State shares can be released together.
Positive impact:
- In Union Budget 2026-27 context, unutilised funds in revised estimates dropped sharply — from 42% (₹1.6 lakh crore) in 2024-25 to 18% (₹69,000 crore) by December 2025.
- In states that adopted SNA-SPARSH for PMAY-R (rural housing), idle funds dropped by 85%
But the Problem Isn’t Fully Solved
Even though idle funds fell 85% in PMAY-R states, the actual utilisation rate stayed at only 14%.
Faster fund flow ≠ Faster spending on the ground.
Also, from Statement 4AA of the Union Budget:
- 38 out of 50 CSS schemes used less than 50% of allocated funds by December 2025
The problem has shifted — money is no longer stuck in bank accounts, but scheme-implementing agencies are not claiming and spending it in time.
Where Exactly is the Blockage? (Last-Mile Friction)
A CAG Report on PMAY-R in Tamil Nadu identified specific bottlenecks:
| Bottleneck | What it means |
| Manual processes | Paperwork done by hand instead of digitally — slow and error-prone |
| Multiple verification layers | Too many approvals needed before money moves |
| Wrong bank account mapping | Beneficiary bank details entered incorrectly — payment fails |
| No defined turnaround times | No deadline for how fast each step must be completed |
These are procedural and physical problems — not financial ones.
What is the 16th Finance Commission’s Observation?
The 16th Finance Commission (currently being constituted for the 2026–31 period) flagged a related issue:
- Without credible data on spending efficiency, schemes that have outlived their purpose keep running — because there’s no formal mechanism to wind them down.
This means public money keeps getting allocated to zombie schemes year after year.
The Way Forward:
1. Digital Public Financial Management (PFM)
It means using integrated digital systems to track government funds from allocation to final spending, ensuring transparency and reducing leakages. It helps in better budgeting, monitoring, and timely release of funds.
2. Observability
It refers to real-time visibility of where funds are lying and how they are being used, enabling quick identification of delays or inefficiencies in the system.
3. Rule-Based Workflows
These are predefined automated processes where approvals and fund releases happen based on set rules, reducing human discretion, delays, and bureaucratic hurdles.
4. Milestone-Based Payments
Funds are released in phases only after achieving specific targets (like completion of a house stage), ensuring accountability and preventing misuse of funds.
5. Real-Time Processing
It ensures instant fund transfer and transaction updates without waiting for batch processing, thereby speeding up implementation and reducing idle funds.
6. Fix Last-Mile Governance
This involves strengthening local administration (district/block level) with better capacity, clear accountability, and simplified procedures to ensure actual delivery of services.
Conclusion
India has significantly improved fund flow efficiency through reforms like SNA-SPARSH, but the persistence of low utilisation highlights deeper administrative and procedural bottlenecks at the implementation level. The next phase of reform must focus on last-mile governance by integrating digital public financial management, improving accountability, and ensuring real-time monitoring to translate financial allocations into tangible developmental outcomes.
Mains Questions
- “Despite reforms like SNA and SNA-SPARSH, CSS fund utilisation remains low. Examine the structural reasons and suggest a way forward.”
- “Just-in-time funding alone cannot ensure last-mile delivery of welfare schemes. Comment.”
- “Critically analyse the role of digital public financial management in improving governance of Centrally Sponsored Schemes.”