The decision is based on an assessment of the realignment of the schemes carried out upto now.

“After the rationalization, schemes now give flexibility and sufficient headroom for states to address local requirements,” said the person, who spoke on condition of anonymity.

In FY23, the Centre sought to spend ₹4.45 trillion under centrally sponsored schemes, up from ₹4.15 trillion in FY22. The spending is higher in the case of central sector schemes, which are fully funded by the union government, at ₹11.8 trillion this fiscal.

A third category of transfer of funds to states takes place under the finance commission grants.

“Whatever rationalization of centrally sponsored schemes we had to do, we have done. No further rationalization or pruning is required…However, a few new schemes that do not have a very high budget may be introduced,” said a second person, who also spoke on condition of anonymity.

With exports facing global headwinds, the Union budget is likely to announce a ₹2,500 crore centrally sponsored scheme to develop 50 districts as export hubs.

It is aimed at helping domestic producers in these districts to scale up manufacturing and find potential buyers outside India to boost exports.

As it will be a centrally sponsored scheme, the Centre will pay 60% of the estimated cost ( ₹1,500 crore) and the rest will be borne by the respective states.

The Centre nearly halved the number of centrally sponsored schemes from 130 to 70 by terminating the ones that have lost relevance while merging those with a low outlay with more impactful ones.

The finance ministry had last year directed all government departments and ministries to re-evaluate and re-design ongoing centrally sponsored schemes and central schemes for the next five years. Approvals were given for a five year period 2021-26.

The five new schemes introduced in the budget this year are the Atmanirbhar Bharat Health Infrastructure Mission, Food Processing Enterprise Scheme, Matsaya Sampada Yojana, Strengthening Teaching —Learning and Results for States (STARS), and Digitalization of Primary Agriculture Cooperative Societies.

One key demand by states during the consultation between state finance ministers and union finance minister Nirmala Sitharaman last Friday was to grant more funds under central sector schemes rather than under centrally sponsored schemes.

This, according to some state finance ministers, would give them greater flexibility in using their own funds.

gireesh.p@livemint.com