Unspent SNA funds: India’s welfare schemes are confronting a curious paradox. Even as Union Budgets announce expanding allocations for flagship social and infrastructure programmes, tens of thousands of crores meant for these schemes remain parked in government accounts, unspent. Over Rs 43,000 crore of centrally sponsored scheme (CSS) funds is lying unspent in states’ Single Nodal Agency (SNA) accounts. Another Rs 25,000 crore which are yet to be transferred, according to Budget Estimates.
This should be seen as a divide between centrally designed spending priorities and the diverse operational realities of states. While Budget allocations for several flagship welfare and infrastructure programmes are expanding sharply, the persistence of idle sums is a challenge that the policymakers must look to tackle and overhaul the design of the funding architecture itself.
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What is the SNA model?
The SNA model was introduced to ensure just-in-time release of funds and improve transparency. Ironically, one of the agendas of introducing the scheme was to prevent large sums lying idle in multiple state-level accounts.
Under the model, funds are routed through a single nodal account for each scheme and releases are linked to utilisation patterns. Good on paper but what went wrong?
Centrally sponsored schemes are inherently tied transfers. They specify how money must be spent and the components on which expenditure is permitted. While such direction ensures national minimum standards in sectors such as education, nutrition, sanitation and drinking water, it also reduces states’ flexibility to respond to local needs. Indian states are not the same in their levels of development priorities and needs. This is the problem with uniform expenditure templates which frequently fail to accommodate these differences.
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A state may urgently require maintenance of existing infrastructure rather than new construction rather than capital works, yet scheme guidelines may not permit such reallocation. In these circumstances, funds remain technically available but practically unusable. So while in theory the SNA model sounds good, in practice the system has that expenditure bottlenecks often originate not in fund availability but in the rigid structure of centrally sponsored schemes.
States are also struggling with transition. The shift to newer payment platforms under the SNA framework has temporarily slowed the pace of fund flows and utilisation. In Uttar Pradesh, departments implementing centrally sponsored schemes reported difficulties during the transition to the new SNA-SPARSH system, Naturally, this led to delays in transfers and affected programme execution. Officials also noted that under the previous arrangement, funds routed through the state treasury could be accessed more readily by departments. Under the new system, however, additional procedural steps and portal readiness are needed. This has led to short-term implementation hurdles. This is a classic case of how reforms intended to improve efficiency can initially produce the opposite effect.
Even as significant balances remain unspent in major schemes such as Jal Jeevan Mission, Samagra Shiksha and nutrition programmes, allocations for these schemes continue to increase in successive budgets. However, the bigger question is why does the government insist on ramping up allocations for flagship national programmes but budget formulation does not operate in line with actual utilisation capacity on the ground.
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Finance Commissions have repeatedly argued that untied transfers are more effective in enabling states to address region-specific developmental priorities. Un-tied funds will allow states to decide not only what to spend on but also how to sequence expenditures according to local administrative readiness. However, the growing scale of centrally sponsored schemes has amplified this issue. Over time, the government has relied increasingly on programme-based spending to signal policy commitments in social and infrastructure sectors. While these schemes have expanded coverage and created national development benchmarks, the center dominance approach has fragmented state-level expenditure planning.
SNA funds: Utilising unspent capital
The government may work on flexibility on the entire allocation for pre-defined components wherein a portion of scheme funding could be provided as adaptable resources within an approved outcome framework. This will allow states to determine the most effective option for expenditure. Economists also believe that the government must work on providing predictable multi-year funding commitments rather than strictly annual release cycles.
When states have funds but lack the discretion to deploy them according to local priorities, utilisation gaps will occur. India’s development challenge today is less about mobilising additional public resources and more about ensuring that the existing flow of funds moves smoothly through the federal system into actual service delivery. However, without ensuring state-level fiscal autonomy via a larger share of untied or flexible transfers, raising budget allocations will not translate into tangible developmental gains but become expanding balances in nodal accounts.