MP’s Funds
Used or misused?

The debate over the use of funds by MPs under the local area development scheme has been on for quite some time. Aditi Tandon finds out the reasons for the confusion surrounding the controversial scheme

In the 15 years of its existence, the Member of Parliament Local Area Development Scheme (MPLADS) has not quite managed a life-saving performance. It still faces scathing criticism that had begun right at its inception on December 23, 1993, when the then Prime Minister P.V. Narasimha Rao announced the scheme in Parliament. He fixed Rs 5 lakh per MP as a token amount to address "locally-felt needs" in his constituency.

Somnath Chatterjee"If you want to know my view, you will not be happy. My view is that the scheme should be abolished immediately."
— Somnath Chatterjee

The proposal came wrapped in troubles, with Somnath Chatterjee, the then leader of the CPM in the Lok Sabha, rejecting it outright, saying: "In principle, we do not accept the proposal. We have the district planning commissions in which MPs, MLAs and panchayats are represented. The planning and priorities are decided there. This (the proposal) will only mean disturbing the priority, which is decided by the district planning board."

In the line of fire

Decades later, Chatterjee’s role has changed, but his stand remains the same. Today, as Speaker of the Lok Sabha, he remains one of the most vocal critics of the scheme, which has been termed "unconstitutional" by several studies as it blurs the line between the roles of the legislature and the executive. In the just-concluded Lok Sabha session as well, the Speaker called for scrapping of the scheme in response to MP Revathi Raman Singh’s query regarding the Speaker’s views about the scheme. "If you want to know my view, you will not be happy. My view is that the scheme should be abolished immediately," the Speaker had said.

Prasanna Acharya"MPLADS is one of the few schemes of the Government of India where the percentage of utilisation is high. Even though there is some genuine criticism of the scheme, it has actually been widely misunderstood."
— Prasanna Acharya

His view, however, favours district-level development. "That is essential," he feels, but adds that money for the purpose should be given to district planning boards, where the three-tier system is fully functional. An MP can make suggestions, but the district planning board should take the final decision," says Chatterjee, whose party’s stand about the MPLADS remains unchanged since 1993.

However, the scheme’s acceptability is questionable, which explains why the Parliamentary Committee on the MPLADS is yet again discussing its desirability. At the heart of the case against the MPLADS is its potential to breed corruption, undermine the Constitution and upset the level-playing field in politics.

The scheme enables MPs to identify works based on "locally felt needs in their constituencies". For this task, the MPs can suggest to district collectors (DC) to allocate funds to the tune of Rs 2 crore per year (the initial amount of Rs 5 lakh was raised to Rs 1 crore in 1994 and to Rs 2 crore in December 1998) for various projects.`A0

CAG criticism

The scheme’s guidelines debar revenue expenditure in any form on commercial and religious places and require that the user agencies maintain the assets created under the scheme.`A0

According to the CAG reports on the performance of the MPLADS, none of these objectives seem to have been achieved. One CAG report noted: "In the present form, the scheme has hardly served its main objectives. It had envisaged taking up of the development works, based on local needs, with emphasis on the creation of durable assets. Audit findings, however, suggest that a significant part of the released money was not utilised (utilisation was 64.2 per cent, states the CAG report, 2000). Besides, works in most cases did not qualify as durable assets. Most remained incomplete; several were inadmissible or not recommended by MPs."

The CAG pointed out gross violations, including an expenditure of Rs 74.12 lakh, on works taken up at religious places. MPLADS funds were used to develop Ramakrishna Mission, construct fishery tanks in mosques, build gumpas and boundary walls for temples. "Contrary to guidelines, in Assam, Bihar, Himachal Pradesh, Jammu and Kashmir, Madhya Pradesh, Orissa and Sikkim, DCs had allowed expenditure on religious places," noted the CAG report, showing an unspent balance amounting to 44.71 per cent of the money released by the ministry; DCs not obtaining utilisation certificates for works involving a whopping Rs 161 crore; implementing agencies not refunding Rs 8.13 crore out of Rs 24.55 crore released to them; clubbing of the MPLADS funds with funds of other schemes; abandoning of works; spending on inadmissible works; and, nodal authorities failing to maintain an assets register.

The CAG had found that under the scheme, Rs 9.16 crore had been spent on executing 518 works of commercial organisations, trusts, clubs and societies.

The Ministry of Statistics and Programme Implementation, responsible for monitoring and evaluating the scheme, admitted at that time that it was not in a position to effectively monitor the scheme at the operational level. It did not have any picture of works under implementation. The ministry’s view, the CAG report said, ran counter to its stated role. Its role was mainly confined to providing resources without any responsibility regarding the use of funds.


Adverse remarks by the CAG prompted the ministry to commission a study of the MPLADS by the programme evaluation organisation of the Planning Commission. It found that although cost-estimates of work recommended by the MPs were required to be done at the time of sanctioning, in reality such estimates were prepared afterwards, perhaps to conform to the amount allocated by the MP. Consequently, many works were either completed by supplementing the MP’s contribution with the funds from other sources or simply by compromising on the quality of the asset created.

Years later, some key indicators of MPLADS have improved, especially with regard to fund utilisation. However, the CAG is yet to re-evaluate the scheme, and the Planning Commission evaluation has found evidence of both financial mismanagement and inflated reporting of the expenditure.

The latest data on the MPLADS must, therefore, be viewed in that light even though it looks good.

Enquiries reveal that since inception of the scheme the ministry has released Rs 18,001.75 crore. The MPs have utilised 16,255.39 crore, 90.30 per cent of the released amount. The unspent balance with the DCs, which was 44.71 per cent of the total amount released in 2000, is just 11.85 per cent. On April 30 a sum of Rs 2127.40 crore was lying unspent with the DCs.

Staunch supporters

Thanks to the fresh data, Prasanna Acharya, Chairman of Parliamentary Committee on the MPLADS, has reason to cheer, as he says: "MPLADS is one of the few schemes of the Government of India where percentage utilisation is so high. Even though I admit there is some genuine criticism of the scheme, it has actually been widely misunderstood." The committee is now re-examining the MPLADS scheme in the light of persistent objections and is expected to submit its report in the monsoon session of Parliament. The committee is studying whether the scheme is unconstitutional and whether it encroaches upon the authority of Panchayati Raj institutions; whether it is benefiting people and is desirable at all.

The committee has already received 200 suggestions and is considering legal provisions to make the DCs accountable for works, increasing the time limit of 45 days for receipt, sanction and commencement of works and preventing the duplication of projects. "MPs have been complaining of discrimination in the execution of works. In many cases, funds worth crores are lying blocked because the DCs are not receptive. In Goa, a sum of Rs 5 crore is blocked," Acharya says.

In favour of the scheme, he points out that since inception, 11,67,964 projects have been recommended by MPs under the scheme out of which`A010,44,479 were sanctioned by the DCs, and 9,47,250 have been completed. The percentage of projects completed over those sanctioned is 90.69, gloats Acharya.`A0

He has support across the political spectrum, with most MPs demanding that the MPLADS fund be raised from Rs 2 crore to Rs 5 crore per year.

Within the Congress, the scheme is favoured. Pawan Bansal, Minister of State for Parliamentary Affairs, defends it by saying, "In a developing country, you can’t be rigid about the distinction between the legislature and the executive. The scheme serves a very important purpose by enabling MPs, who are people’s representatives, to address local problems through recommendation of development works. The MPs have that much of a right."

The BJP has divergent views, with L.K. Advani, Leader of the Opposition in the Lok Sabha, not favouring the scheme. He had endorsed the Lok Sabha Speaker’s view when the latter called a dinner meeting on December 20, 2005 to discuss the MPLADS following a sting operation that showed MPs striking deals. On December 23, 2005, the Speaker called another meeting of the leaders of political parties to discuss the need for the MPLADS in the light of the CAG report and another report by former MP Era Sezhiyan.

Plugging loopholes

The meeting ended with an agreement that rather than scrapping the scheme, steps should be taken to plug the loopholes. Surprisingly, some MPs like Ram Vilas Paswan expressed their frustration with the MPLADS, saying 50 per cent of the electoral losses were due to the scheme.

As for the Speaker, he had, as early as July 2005, addressed a letter to Prasanna Acharya, citing the observations of the CAG and criticisms of the scheme by Sezhiyan, former Chairman, Public Accounts Committee, in a study he undertook at the Institute of Social Sciences.`A0

"You may be aware that divergent views are being expressed on the proper implementation of the scheme and in fact, many Honourable Members are even questioning the propriety of the continuance of the scheme. I would be happy to receive the committee’s opinion before any further step is taken," the Speaker wrote.

The committee, on its part, expressed concern over the lacunae pointed out in the reports. But on the pointed criticism of the MPLADS, that it usurped the powers of the executive and diverted funds from rural and local bodies , besides increasing the area of conflict between the district administration and PRIs, the committee said the MPLADS was a government-sponsored scheme and thus it was for the government to fit it into the constitutional framework. It made 12 recommendations for improvement in the scheme, but the ministry accepted only three.

Panel’s view

"In our opinion, the role of an MP in MPLADS is only to identify and recommend a project to the DC concerned. The DC alone accords administrative sanction to projects. Even the implementing agency is identified by the DC, not the MP," felt the committee, adding that the problems pointed out in the implementation of the MPLAD scheme were similar to those encountered in other Centrally-sponsored schemes. "An effort should be made to rectify errors in the implementation of the scheme," the committee replied to the Speaker. It is now, however, having a fresh look at the scheme to frame more effective guidelines.

While the committee deliberates, the one report that it will find hard to ignore will be Era Sezhiyan’s "MPLADS – Concept, Confusion and Contradictions" in which Sezhiyan argues that the scheme amounts to usurpation of powers of the executive by the legislature since it is not the function of the legislators to have a budget of this kind, their sole function being to legislate and highlight the acts of omission and commission of the executive.

It adds that by virtue of the powers to indicate the works of their choice to the tune of Rs 10 crore in one term of five years (Rs 12 crore for Rajya Sabha MPs for six years), the MPs wield a power, which is essentially executive and, therefore, beyond the jurisdiction of their legislative functions. As such, the scheme is in violation of the Constitution.

In view of the audit reports stating that the MPs overfed certain areas, violated guidelines to spend money on memorials, clubs, and other private organisations, the Sezhiyan report states that with the virtual operation of the scheme by the MPs, they were bound to develop a pecuniary interest and, therefore, their position was not short of holding of an office of profit, which is barred under the Constitution.