Explained: What Is MPLAD Scheme And How MPs Can No Longer Use The Interest Accrued On Funds

The Union government revised rules for several central schemes governing the utilisation of funds. One among them is the MP Local Area Development Scheme (MPLADS).

Significantly, the Ministry of Finance ordered the revision of rules when the Members of Parliament (MPs) were urging to increase the MPLADS Scheme fund.

As per the 2016 guidelines, funds released under the scheme were non-lapsable and the interest accrued on funds could be used for allowed works recommended by the MPs.

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With revised rules, the interest accrued on funds cannot be used and it should be necessarily remitted to the Consolidated Fund of India (CFI).

What is the MPLAD Scheme?

The MP Local Area Development Scheme (MPLADS) is a union government scheme in which MPs of both houses including nominated members, are empowered to recommend development programmes in their respective constituencies. Every year they are allotted Rs 5 Crore to spend on the developmental programme.

In states, the schemes differ on the basis of allotted amounts to MLAs. Under the MLALAD scheme in Delhi, each MLA can recommend works up to Rs 10 crore every year. Delhi tops in terms of the amount allocated to MLAs for spending in their constituencies.

Under the scheme, the funds are released in two instalments of Rs 2.5 Crore each and were earlier non-lapsable. The Lok Sabha MPs can recommend work in their constituency and Rajya Sabha MPs can recommend from anywhere in the state from where they have won the election.

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The district authority has the power to examine the eligibility of works, sanction funds and implementing agencies and monitor the scheme at the grass-root level.

The scheme was first announced by then Prime Minister P V Narasimha Rao on December 23, 1993, in Lok Sabha. In 2018, the Cabinet Committee on Economic Affairs approved the scheme until the term of the 14th Finance Commission i.e. March 31, 2020.

Scheme was suspended during Covid-19

When the Covid-19 pandemic hit the country, the government decided to suspend the MPLAD scheme during the financial years 2020-21 and 2021-22. To combat and manage the negative impact of the pandemic, the MPLADS fund was placed at the disposal of the Finance Ministry.

Last year in November, the government restored the MPLAD scheme for the remaining part of 2021-22 and continued MPLADS up to 2025-26.

It was estimated that this decision of the central government availed Rs 7,800 crore to the government. The amount is only 4.5 per cent of the Rs 1.70 lakh crore relief package announced for the poor under the Pradhan Mantri Garib Kalyan Yojana.

No direct transfer of funds to MPs

TOI (Representational image)

Under this scheme, the government directly transfers funds to the local authorities of respective constituencies. MPs do not receive any money but can recommend works following the guidelines in their constituency.

Under the scheme, there is a set of guidelines that focus on building up durable community assets like school buildings, roads etc. In the case of non-durable assets, MPs can make a recommendation under limited situations like the use of MPLAD funds were allowed to buy PPE kits, coronavirus testing kits etc.

Did the scheme benefit people?

While approving the continuation of the scheme in 2018, the government stated, ¡°the entire population across the country stands to benefit through the creation of durable assets (at local level) like drinking water, education, public health, sanitation and roads etc, under MPLAD Scheme¡±.

Under the scheme, over 19 lakh projects worth Rs 45,000 crore had been sanctioned, of which 82% of the projects have been in rural areas, as reported by the Indian Express.

The evaluators appointed by the government concluded that the development works through the scheme positively impacted the local economy, social fabric and feasible environment.

Criticism of MPLAD scheme

On the scheme, the 2nd ARC stated that it "seriously erodes the notion of separation of powers, as the legislator directly becomes the executive".

The Comptroller and Auditor General of India observed that there is poor utilisation of funds, poor monitoring by the ministry, poor quality and, at times, inadmissible work, and suspected fraud and corruption.

Further, the proper documentation of works as per the guidelines lacks.