The Finance Ministry has mandated clear ‘sunset clauses’ and deadlines for all centrally sponsored schemes starting April 1, 2026. All central government schemes will be covered under this directive, which has been issued by the Finance Ministry.

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The Ministry of Finance has instructed all ministries and departments to set clear ‘sunset clauses’ and timelines for each new centrally sponsored scheme (CSS) to be launched under the 16th Finance Commission cycle, starting April 1, 2026, and for existing schemes. The Ministry of Finance has also sought additional information from all ministries, including the justification 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 specifically created for each CSS after its evaluation.

More Information Required
ET, in its report, cited a letter sent by the Ministry of Finance to all ministries. The Department of Expenditure under the Ministry of Finance issued the directive in the first week of December, asking ministries and departments to revise their evaluation reports, include the new details, and submit the updated versions by the first week of January.

Officials said the purpose of the additional information is to quantitatively assess the performance of the schemes, identify ministries that have repeatedly failed to meet expenditure targets, and provide details of the flow of funds to determine the exact time taken for approval and disbursement. Ministries were initially required to submit their reports by the end of December, but they have been given an additional week in light of these additional requirements.

What is a Sunset Clause and Why is it Necessary?
A senior official, quoted in media reports, said there is a clear directive that all schemes must have a sunset clause that assesses the financial burden on the exchequer and sets a roadmap and deadlines for achieving the desired outcomes. This evaluation is conducted every five years. It reviews the performance of each scheme, the quality of expenditure, the utilization of funds, and the results achieved.

It also helps in phasing out unnecessary programs to optimize capital expenditure. As stated in the letter, the same process will be followed for schemes reviewed by NITI Aayog. The letter further states that even where third-party evaluations have been used, ministries will still have to submit their own data, analysis, and conclusions along with the external reports.