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District Sector Fund Flow, Resource allocations and utilisation: Issues and Challenges in Odisha

Policy BriefsApr 26, 2024

This policy paper attempts to examine the resource transfer processes and utilization of funds for health at the district level in two select districts of Odisha. The findings provide insights to improve the fund flows at the district level which is the main implementation unit for health services.

Budget preparation is an important health sector concern. More funds for the health sector will not achieve universal health coverage (UHC) unless well-functioning financial management systems are in place and the funds are utilized efficiently. The way the budgets are formulated and budget allocations are made has a direct bearing on the performance of the health sector.

Understanding the budget formulation process, prioritization, the level and nature of public expenditure, allocation, and utilization patterns are crucial to increasing the efficiency of public spending. Though prioritization of expenditure is a political process rather than purely a technical exercise, understanding of these issues will help influence the process to enhance health system performance. In India, the annual budget for the union government is prepared by the finance ministry with support from other ministries and passes through –the preparation phase, parliamentary approval, execution, and auditing.

During the preparation phase, the finance ministry makes consultations with different bodies – industry representatives, political parties, and civil society organizations to take their views on budget priorities. During this stage, the budget can be influenced by placing demands. Current pieces of evidence on resource allocation and spending on the National Health Mission (NHM) in India suggest the wide gap between planning, release, and actual expenditure in backward districts. A higher proportion of NHM money is spent at the district level and higher devolution takes place for some specific programs – RCH flexi pool and mission flexi pool at the district and sub-district level.

Further, a study carried out in Uttarakhand found that the top-down approach is followed instead of the bottom-up approach as suggested by the NHM. This may imply that inputs from lower levels are not taken as well and resource needs of the lower level facilities are not fulfilled.

A recent study suggests huge underutilization of NHM money to the extent of 45% is mainly due to a higher share of the release of funds in the last quarter. In some states like Bihar and Maharashtra, there is a substantial delay in the release of funds from the state treasury to health societies. In contrast in Odisha more than 94 percent of funds are released in less than a month.

Health being a state subject in India, the resource transfer system from the state to health care providers, and budget execution at the district and sub-district levels are crucial issues. These assume significance in strengthening decentralized planning at the district and execution process which leads to efficiency in public spending.

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