All central schemes will come under the purview of 'sunset clause', Finance Ministry issued instructions
The Ministry of Finance has mandated clear sunset clauses and deadlines for all centrally sponsored schemes, effective April 1, 2026. Ministries will now be required to provide detailed information about scheme performance, expenditure, fund flow, and post creation during evaluation. This move aims to assess performance, identify underperforming ministries, and ensure government spending.
The Finance Ministry has directed all ministries and departments to set clear sunset clauses and timelines for each new Centrally Sponsored Scheme (CSS) and existing schemes launched under the 16th Finance Commission cycle, starting April 1, 2026.
The Ministry has also sought additional information from all ministries, including the rationale for continuing any scheme, actual expenditure versus budget allocation over the past five years, the flow of funds from the central pool to the end beneficiary, and the number of posts created specifically for each CSS after valuing it.
More and more information had to be given
ET's report cites a letter sent by the Finance Ministry to all ministries. The Department of Expenditure, under the Ministry of Finance, issued instructions in the first week of December, asking ministries and departments to revise their evaluation reports, incorporate new details, and submit updated versions by the first week of January.
Officials said the additional information is intended to quantitatively assess the scheme's performance, identify ministries that have repeatedly failed to meet expenditure targets, and detail the flow of funds to determine the precise timeline for approval and release.
Ministries were originally scheduled to submit their reports by the end of December, but have been given an additional week's time to comply with these additional requirements.
What is a sunset clause and why is it important?
A senior official quoted in a media report said that there are clear instructions that all schemes must have a sunset clause that assesses the financial burden on the exchequer and sets a roadmap and deadlines for achieving results.
This evaluation, conducted every five years, reviews each scheme's performance, quality of expenditure, use of funds, and results.
It also helps phase out unnecessary programs to optimize capex. The letter states that the same process will be followed for plans reviewed by NITI Aayog.
The letter further states that where third-party evaluations are used, ministries must submit their own data, analysis, and findings alongside the external reports.