Explained | The new rules for utilisation of funds under MPLADS

The Centre has revised the procedure dealing with the flow of funds under central sector schemes, including the MP Local Area Development Scheme, or MPLADS. As per the revised norms, MPs will no longer be able to use interest accrued on the fund for development projects.

May 13, 2022 03:18 pm | Updated 03:18 pm IST

Revised norms state that all interest earnings will be deposited with the Consolidated Fund of India.

Revised norms state that all interest earnings will be deposited with the Consolidated Fund of India. | Photo Credit: PTI FILE

The story so far: The central government recently revised rules governing the utilisation of funds under various central sector schemes (CCS), including the MP Local Area Development Scheme (MPLADS). According to the revised norms, interest accrued on the annual fund of Rs 5 crore allotted to each Member of Parliament for development works will have to be returned to the Centre.

To put it in simple terms, MPs will no longer be able to use interest accrued on MPLADS funds for development works since the revised procedure requires these earnings to be compulsorily remitted to the Consolidated Fund of India (CFI).

The MPLAD Scheme and how it works 

Fully funded by the Centre, the MPLAD scheme was launched in December 1993 by the then-Prime Minister P.V. Narasimha Rao to provide funds to MPs to facilitate developmental works in their constituencies. The scheme puts special focus on the development of areas with Scheduled Caste and Scheduled Tribe populations. MPs are to recommend works costing at least 15% of the annual MPLADS entitlement for areas inhabited by SC populations and 7.5% for areas with ST populations.

The role of an MP is, however, limited to the recommendation of a project. The onus is on the district authority to sanction, execute and complete the recommended project within a particular timeframe.

Initially, MPs were allotted Rs 5 lakh each to recommend works in their constituency. The annual entitlement was later hiked to Rs 1 crore in 1994-95 and further raised to Rs 2 crore in 1997-98. In 2011, the United Progressive Alliance (UPA) government announced another increase in the MPLADS fund — from Rs 2 crore to Rs 5 crore.

Brief suspension due to COVID-19 pandemic

The programme was temporarily suspended from April 2020 to November 2021, with the Centre saying that the funds were diverted to manage the Covid-19 pandemic. The Centre’s move to temporarily suspend the fund was widely criticised by the Opposition. The TMC termed the decision “whimsical” and “undemocratic”, while the Congress said the decision would undermine the role of an MP. Many Parliamentarians also wrote to the Prime Minister to seek restoration of the MPLADS funds.

In November 2021, the Centre restored the scheme because of an “improvement in the economic scenario,” saying that Rs 6,320 crore was saved due to its temporary suspension. MPs were given only Rs 2 crore for the remaining period of the fiscal year 2021-2022. The entire amount of Rs 5 crore will be disbursed from the next financial year, the Information & Broadcast Ministry said.

Earlier this year, a Parliamentary committee urged the Centre to release Rs 5 crore in advance to each MP for the fiscal year 2023-24, to complete projects and pending requests.

MPs across party lines have made regular demands for a raise in the annual entitlement under the MPLAD scheme.

Who can utilise the MPLADS funds

The Ministry of Statistics and Programme Implementation (MoSPI) is responsible for the release of funds, policy formulation and prescribing monitoring mechanisms for the implementation of the MPLAD scheme. As per the ministry’s 2016 document titled ‘Guidelines on Members of Parliament Local Area Development Scheme (MPLADS)’, all Lok Sabha or Rajya Sabha MPs (including nominated members) can recommend development projects to the district authority concerned in their nodal district. 

According to the guidelines, all Lok Sabha members have to select a district as the nodal district. In case there are multiple districts in the constituency, funds are released to the nodal district authority, which then transfers funds to other districts. A Rajya Sabha MP can recommend projects in more than one district in the State from where he/she was elected. Nominated members, meanwhile, can select one or more districts from any one State.

In case an elected MP wishes to contribute MPLADS funds outside the constituency or the State/UT, they can recommend work up to Rs 25 lakh in a financial year. 

What projects come under MPLADS?

The guidelines state that the development projects under MPLADS should be focused on the creation of durable community assets in infrastructure, electricity, drinking water, public health, sanitation, and education. The MP can also make recommendations on non-durable assets, but this is only under special circumstances. This may include the provision of computers and books to schools or libraries, ambulances, including those for injured animals, assistance to bar councils and other matters, subject to the conditions laid out in the guidelines.

In case of natural disasters, MPs from non-affected States can also recommend projects in places ravaged by calamities like floods, cyclones, and earthquakes.

Who oversees implementation

MPs do not directly receive funds under MPLADS. The Centre directly transfers the sanctioned amount in two instalments of Rs. 2.5 crore to the district authorities of the concerned MP’s nodal district after a recommended project gets approval.

Per guidelines, a District Collector, District Magistrate or District Commissioner is the correct authority to implement MPLADS. For municipal corporations, the Commissioner or Chief Executive Officer functions as the authority.

After an MP recommends a project, the district authority selects an implementing agency responsible for executing it according to the respective State government procedures. Ministry guidelines stipulate that all recommended eligible works have to be sanctioned within 75 days from the date of receipt of the recommendation. 

MPLADS rules revised: what changes?

The Union Finance Ministry ordered a revision in the rules governing central sector schemes, including MPLADS, in a memorandum dated April 11.

The change in rules indicates that interest earnings from funds released under MPLADs will no longer be added to the fund and used for development works. Instead, the interest earned has to be mandatorily remitted to the Consolidated Fund of India (CFI.)

Earlier, according to the 2016 guidelines, funds released to district authorities under the MPLAD scheme were not lapsable, and interest accrued on funds released to the district authority could be used for permissible works recommended by the concerned MP.

Sidebar: CFI is one of the government accounts for all its expenditures other than exceptional items. The CFI includes all revenues received from direct and indirect taxes, interest earned and expenditure incurred by the government. A Parliament nod is needed to withdraw resources from the CFI.

Current status of MPLADS

The Government of India has released Rs 3,167 crore under the MPLAD scheme as of May 12, 2022, according to data about the 17th Lok Sabha (April 2019-till date) on the MoSPI site. Of the Rs 3,079.6 crore worth of total projects recommended by the MPs, district authorities have sanctioned Rs 2,187.75 crore, while Rs 1,665.49 crore has been spent so far.

To put the numbers in context, around 53 per cent of funds released by the Centre under the MPLADS have been utilised for development projects since 2019. Official data shows that Rs 1,729.61 crore remain unspent with district authorities at present.

The status of fund release and expenditure under the MPLAD scheme.

The status of fund release and expenditure under the MPLAD scheme. | Photo Credit: Ministry of Statistics and Programme Implementation

The Response

MPs were intimated about the change in MPLADS rules by Lok Sabha and Rajya Sabha secretariats. Sources, however, told The Hindu that the parliamentary committee on MPLADS wasn’t consulted before the new procedure was notified, which has irked the Opposition.

In a letter, CPI(M) MP John Brittas urged Finance Minister Nirmala Sitharaman to roll back the ministry’s decision. MPs should be allowed to continue recommending “works for the interest amount accrued for the MPLADS funds disbursed to them every year by retaining the procedure in vogue as such,” he wrote. The CPI(M) leader added that the government revising the norms showed how it takes unilateral and arbitrary decisions without discussing them with the stakeholders.

Trinamool Congress MP Jawahar Sircar told Hindustan Times that the Ministry’s revised procedure for the flow of funds under central sector schemes was “terribly mechanical and unimaginative” drafting.

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