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. "


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