The Prime Minister has decided on a state-of-the-art international convention centre in Lucknow, the city of nawabs. He could have spent this money on developing better civic amenities in his constituency, but since these are discretionary funds, the decision is really up to him. The Defense Minister has chosen investment in school infrastructure for his constituency, Nalanda, the ancient seat of learning. Like other members of the parliament, the PM and the Defence Minister are within their rights to spend the annual provision of Rs 2 crores made out to them under the Local Area Development Scheme (LADS). But clearly, local area development means different things to different MPs.

For a majority of the parliamentarians, it means physical structures that one can put a foundation stone on and hold a ceremony. In a decade since the scheme was inaugurated in 1993, Rs. 12,140 crores have been spent by the Members of Parliament to implement small capital works of their choice in their constituencies. Spending on capital projects has proved handy to woo electorates, if nothing else. No wonder, the 9th Report of the Lok Sabha Committee on MPLADS released in 2001 echoed similar feelings of its members while recommending increase in allocation to 'at least Rs. 5 crores'.

But the Planning Commission wonders if the extremely small projects made possible by this allocation have made any difference to peoples' lives in the constituencies. Also, allegations have been made by certain Members of Parliament about reported diversion of LADS for bolstering the image of the erstwhile ruling party in Uttar Pradesh. These accusations of mismanagement and misappropriation of funds meant for the public have raised the question: should LADS be discontinued?

The scheme allows a Member of Parliament to choose the use to which the money is put, and get the work implemented through the office of the District Collector, by pushing the machinery of the State into service. But a sample audit of LADS performance in 110 constituencies over the last three years has found serious irregularities in fund utilisation. The audit reports found that 6,257 works had been sanctioned by District Collectors without proper recommendations from the MPs concerned; 3405 works were allowed without the requisite technical sanction and administrative approval. Further, utilisation certificates were not submitted for 11,915 of the 16,978 works examined.

LADS is clear that the money must be used for the creation of durable assets for public use but hasn't defined what such 'durable assets' are. One MP from Orissa has built a library that has everything but books.
The scheme is clear that the money must be used for the creation of durable assets for public use but hasn't defined what such 'durable assets' are. With wide latitude, members freely flout the guidelines; the MP from Orissa has built a library that has everything but books. Visibility for the parliamentarian seems to be key behind the choice of these assets.

There are also other objections to the scheme. For instance, although one object of the scheme was to remove mal-administration and creeping corruption in execution of works by the Government, the chosen projects still get executed by the same machinery, negating this objective. Further, the constituency funds are drawn from the monies earmarked for the respective States; in effect these are not additional resources but funds that have been innovatively diverted to bolster the image of MPs in their constituencies. State governments thus find themselves in the position of subsidising initiatives that they themselves may not approve.

Despite the obvious benefits to incumbent MPs, some parliamentarians want the LADS scrapped because they feel that it isn't fulfilling its objectives. A few have burned their fingers during implementation of various projects. The members themselves rarely supervise the capital projects, and often delegate this responsibility to close friends and family members. This has led - predictably - to misappropriation of funds. The MP from Vaishali in Bihar claims he has been cheated by his nephew, and wants the entire scheme junked.

LADS may also violate the letter and spirit of the Constitution. It extends undue favours to the elected representatives for strengthening their electoral base. Such friendly allocations allow incumbents to improve their chances of re-election through the use of government money in ways that their political opponents cannot. LADS is also contradictory to the decentralisation process - of empowering the panchayats and other local governments - by leaving funds in the hands of MPs.

This direct participation of Central representatives in implementation of local works has created parallel power centres to the state's machinery, and also distorted the system of administrative responsibility and legislative control. MPs cannot question lapses in administrative functioning of the government if they are also involved in actual execution of capital projects in the company of the same administrative machinery they are supposed to supervise. Further, by allowing the unutilized funds from one year to flow over to the next without getting lapsed provides for serious loopholes for the misappropriation of the public money! The usual checks and balances, which automatically become applicable to Government expenditure, do not, therefore, apply in the administration of LADS funds.

Perhaps some of these faults can be overcome with proper oversight. The Planning Commission's raised eyebrows and the various Audit Reports of the scheme certainly provide enough reason for increased monitoring of LADS projects, but the Ministry of Planning and Implementation has expressed its inability to set up a separate cell to do this. As a result, the discretionary funds will likely continue to be put to their familiar indiscretions for some time more.