PUCL Bulletin,
June 2003
Misuse of development funds
-- By Era Sezhiyan
The budget session of Parliament this year started with a furious controversy
about the misuse of funds allotted under the Members of Parliament Local
Area Development Scheme (MPLADS). The Samajwadi Party MPs alleged that
the Uttar Pradesh Chief Minister, Mayawati, had asked her party legislators
to divert some of their constituency funds to bolster the BSP's coffers.
Ms. Mayawati retaliated with counter allegations. The confrontation appears
to have dented the prestige and credibility of MPs in general. The allegations
represent only the tip of the iceberg of mismanagement of the scheme.
The MPLADS was initiated on December 23, 1993 with a provision of Rs.50
lakhs per constituency to enable MPs to implement small capital works
in their constituencies. The outlay was increased to Rs.1 crore in 1994-95
and to Rs.2 crore in 1998-99. The Ninth Report (December 2001) of the
Lok Sabha Committee on MPLADS recommended increasing the quota "at
least Rs.5 crores" in view of "the phenomenal cost escalation
of every item of day-to-day life". The budgetary grants for this
scheme from 1993-94 to 2003-2004 totalled Rs.12,140 crores. If the annual
quota is raised to "at least Rs.5 crores", the budgetary allocation
will come to about Rs.4,000 crores per annum.
The main features of the Scheme are that an MP can recommend works in
his constituency to the District Collectors or Commissioners who will
get them completed through the implementing agencies of the State Governments.
The works shall involve creation of durable assets for public use. The
ownership of the assets should vest in the Government. The works to be
recommended by MPs are subject to the guidelines prescribed.
The scheme suffers from serious defects. First, it contravenes the spirit
and letter of the Constitution in so far as it affects the distribution
of powers in the federal set-up, as it negates parliamentary control over
the Executive and distorts the role of MPs. Second, the administrative
Ministry had not evolved so far a satisfactory financial procedure, leading
to serious violation of every norm of audit and accountability.
When Parliament sanctions grants for certain projects. It is for the
administrative Ministry concerned to implement the works subject to the
directions and rules prescribed. If there is any failure on the part of
Government, it is for Parliament and its Committee system to fix responsibility
and take remedial measures. Instead of strengthening the supervisory role
of MPs, the MPLADS involves them "in the entire system of implement
and completion of project works" and makes them "participate
directly in the administrative work of the country". By his participation
directly in the administrative system, the MP loses his constitutional
authority and ability to control the administrative Ministries, at least
in respect of expenditures incurred under the Scheme.
The grants given under the Union Budget to the MPLADS from part of 'Central
Assistance to State Plans'. Thus, the constituency funds to the MPs are
merely diversion of funds earmarked for the respective States. While the
services of District Collectors and the implementing agencies of the States
are utilised for completion of work under the Scheme, the guidelines do
not allow any payment to the States for the services rendered. The State
Governments have to bear such expenses over and above depletion of the
Central assistance due to them.
The Ministry of Planning and Programme Implementation is responsible for
the overall supervision and budgetary control of the Scheme. When the
Audit took up in 1998 scrutiny of the performance of the Scheme, it found
that the Ministry had not done any book-keeping - it was unable even to
give particulars of year-wise release of funds of the district heads and
the expenditure incurred. The Audit had to approach the State agencies
in the regard.
In Para 3, the 2001 Audit Report observed: "The Central Government
transfers the funds for scheme directly to the District Collectors. These
funds do not lapse at the end of the financial year. The usual checks
and balances, which automatically become applicable to Government expenditure
when Government expenditure flows from normal state budgetary route, do
not, therefore, apply in the administration of the MPLADS funds. It was
necessary for the Ministry to have devised appropriate accounting procedures
at the stage of formulation of the scheme itself."
The object of establishment of the Scheme was to remove mal-administration
and creeping corruption in execution of works by the Government. Instead,
direct participation of MPs in implementation of the works has distorted
the entire system of administrative responsibility and legislative control.
The Audit Reports found innumerable irregularities - 6257, works had been
sanctioned by District Collectors without proper recommendations from
the MPs concerned; 3405 works were allowed by the District Collectors
without the requisite technical sanction and administrative approval.
The 2001 Report pointed that the District Collectors did not get utilization
certificates in 11,915 works, forming 70 percent of 16,978 works completed.
These findings were the outcome of sample audits in 111 constituencies
for a period of three years. If a thorough scrutiny of all the projects
in all the constituencies for the ten years were to be conducted, the
irregularities revealed could be of mind-boggling proportions.
There was a suggestion in the Second Report of the Rajya Sabha Committee
(2001) for setting up a separate cell in the Union Ministry to monitor
the progress of the projects under MPLADS. To this, the Ministry sent
a reply: "As Department of Statistics & Programme Implementation,
Ministry of Planning and Implementation, has been provided with skeletal
staff, it is not possible to set up a separate cell to monitor the progress
of the projects taken under MPLADS."
The 2001 Audit Report summarised its findings: "In its present form
the Scheme, which is in operation since 1993 has hardly served its main
objectives. The scheme envisaged taking up works, which were developmental
in nature and were based on local needs, with emphasis on creation of
durable assets. Audit findings, however, suggest that besides the fact
that a significant part of released money was not utilised, the works
that were carried out in a large number of cases did not qualify for the
definition of durable assets. A large number of them remained incomplete.
Several others were either inadmissible or were not recommended by the
Members of Parliament."
The Evaluation Report (September 2002) of the Planning Commission on the
Local Area Development Scheme has also pointed out its weakness: "It
seems that in a large number of cases, once the work is sanctioned and
funds released, nobody kept track of progress. Such 'status not known'
works are largest in number among those classified under Drinking Water
and Sanitation followed by Roads and Bridges. The evaluation team during
its fields visits failed to locate quite a few of the assets claimed to
have been created in these sectors."
Do we have a Parliament that controls the Ministry or a Ministry that
dictates terms to the Parliamentary Committees? It is a pity that the
Scheme involving more than Rs.12,000 crores of investment is being managed
- or mismanaged - by a Ministry that has no commitment to financial responsibility
and administrative accountability. "