Policy Update
Sai Srinesh Dupatti
Background
Since India’s independence, the North Eastern Region (NER) has experienced a variety of socioeconomic dynamics. The eight states, including Sikkim, have distinct cultures and languages that are founded in diverse socioeconomic and political upheavals. In response, the government has initiated investments and development plans to support resource and infrastructure development, urban amenities, capacity building, and promote the Ministry of Micro, Small and Medium Enterprises(MSMEs).
Figure 1. North-East India
Source: IASGYAN
The historic challenges faced by the North Eastern Region (NER) are due to its geographical isolation, infrastructure deficits, and socio-political complexities. To address such things, the Government of India introduced the Lump Sum Provision Scheme in the financial year 2001-2002, allocating 10% of the annual budget of central ministries specifically for the North Eastern Region. This initiative came to light to modify the regional disparities by funding projects catering to these states’ unique needs.
Overview of the Lump Sum Provision Scheme
The Lump Sum Provision Scheme was launched to enhance the developmental challenges of the North Eastern Region (NER) with main features such as Funding Mechanism, Implementation, and Focus Area.
So, the key traits of the Funding Mechanism are that Central Ministries allocate 10% of their annual budget to establish the projects in NER, including Sikkim.
Implementation: Projects are funded by the central government and proposed by the state government through respective agencies to improve state welfare.
Focus Area: This scheme focuses on infrastructure development, urban amenities, capacity buildings, and promoting Micro, Small, and Medium Enterprises (MSMEs).
Recent Budget Allocations and Trends
However, considering the burning issues of the North Eastern Region and developmental challenges, the Government of India increased the budget allocation for the Ministry of North Eastern Region (DoNER) in the financial year 2025-2026. Subsequently, the investment from the centre has risen and is showing a positive concern about pulling on the budget of 5,915 crore this year. This marked a growth of 47% from the previous year’s allocation of 4,006 crore. This symbolizes the hike and priority of the government to progress the North Eastern Region.
Also, for the state of Sikkim, the state’s budget for 2024-2025 was presented with a total expenditure of 14,490.67 crore. The significant hike in capital expenditure was also increased up to 3,752.90 crore, which subsequently led to the development progress of the State. So, overall expansion of development factors in the states has risen and drastically increased the frequency of growth.
Recent policy trends from the government of India have placed significant emphasis on North Eastern States, promoting various economic activities aimed at improving welfare. Such development policies may influence the region’s future development challenges and aspirations.
Implementation and Impact
Infrastructure Development:
Under the scheme, numerous projects have been established in the NER to improve the infrastructure. The scheme was maintained prior to urban development and solid waste management.
Urban Development: Construction of roads, bridges, drainage systems for better town planning and market complexes to improve the urban vendors’ living conditions, which bolsters their economic growth and development.
Figure 2: Storm Water Management of Kohima City SAAP III
Source: Urban Development, Government of Nagaland
Solid Waste Management: This initiative was launched in towns like Daporijo and Anini in Arunachal Pradesh, and solid waste management systems are being implemented with a focus on door-to-door collection to segregate source and efficient transportation to processing plants. Efforts are also being made to ban single-use plastic and establish compost pits across the states.
Figure 3. Door-to-door campaign on source segregation of waste
Source: Morung Express
Promotion of MSMEs in NER & Sikkim
The Ministry of Micro, Small & Medium Enterprises launched several schemes in the North Eastern Region to foster the growth of MSMEs in that region.
Mini Technology Centers: The scheme envisages financial assistance to state governments for setting up new and modernizing existing Mini Technology Centers to provide common manufacturing, testing, and training facilities.
Financial Assistance: The Government of India provides 90% financial assistance (up to 10 crore) for machinery and buildings, with building costs capped at 20%; land costs are excluded.
Development of New and Existing Industrial Estates: Through this scheme, financial assistance for the development of new and existing Industrial Estates will be provided with the necessary infrastructure to support MSMEs.
Financial Assistance: 80% of infrastructure costs (up to 8 crore) are funded for developing new or existing industrial estates, covering essentials like power, roads, and drainage.
Development of Tourism Sector: Due to the geographical location and cultural heritage in the North Eastern Region being unique for its isolation, there is financial assistance for the development of the tourism sector, which reflects the local markets towards growth.
Financial Assistance: Up to 4.5 crore or 90% of the project cost (whichever is lower) is provided by the Government, with the remaining cost borne by the state.
Challenges in Implementation
Despite the scheme’s potential output, numerous challenges have emerged in this scheme. Based on a thorough analysis of the revised operational guidelines for the 10% Lumpsum Provision Scheme for the Benefit of the North Eastern Region (NER), including Sikkim, here are some significant challenges in implementation.
Project Preparation and Administrative Delays:
Challenge: Preparing Detailed Project Reports (DPRs) requires the collaboration of all administrative and technical stakeholders (e.g., encumbrance-free land, environmental clearances), which is time-consuming and complex.
Because many towns in NER lack infrastructure and experts for projects, this leads to late project submissions and approvals.
Inadequate State Capacity for Monitoring and Execution:
Challenge: Lack of Project Monitoring Units (PMUs) and technical personnel at the state level impairs consistent project monitoring.
Delays in Fund Release and Utilization:
Challenge: A multi-tiered fund release structure always causes delays. States must first utilize 70-100% of prior installments and submit utilization certificates. This impacts many states that struggle due to weak financial management systems.
Land and Regulatory Bottlenecks:
Challenge: Zoning laws and other statutory regulations can delay or disqualify projects due to requirements for encumbrance-free land. This is due to outdated regulatory mechanisms and land records.
Lack of Beneficiary Involvement:
Challenge: Weak grassroots-level institutions, poor civic engagement, and lack of awareness among the urban poor limit the effectiveness and transparency of implementation.
Enhancing the Effectiveness of the Lump Sum Provision Scheme: Addressing Operational Challenges
The Lump Sum Provision Scheme plays a vital role in developing marginalized communities. However, various operational and administrative challenges have evolved to hinder the potential. To cope with such challenges and enhance its impact, the following strategic measures are recommended:
Streamline Administrative Processes:
Simplifying the procedural guidelines to make the work more efficient, digitizing workflows for fund disbursal and reporting, and decentralizing the decision-making to reduce delays and improve efficiency.
Capacity Building of State Departments:
Strategic training programs should be organized regularly, and technical support units should be established across the regions to enhance the planning and execution capabilities of implementing agencies and to promote inter-state knowledge sharing.
Strengthening Monitoring and Evaluation:
The government should develop a robust monitoring framework with performance indicators, utilize third-party evaluations, and incorporate digital tools such as dashboards and GIS for real-time project tracking.
Ensuring Effective Fund Utilization:
Implementation of performance-based fund releases and periodic financial audits can help in identifying lapses or misutilization, thereby fostering fiscal discipline and optimal use of resources.
Enhancing Stakeholder Engagement:
Encouraging participation from local communities in the planning and implementation process ensures that the projects cater to actual needs and gain grassroots support. Consultations with experts and NGOs can bring innovative ideas, along with feedback mechanisms to establish platforms for regular input from beneficiaries and improve social service delivery.
Conclusion
While the 10% Lumpsum Provision Scheme aims at equitable development for the North Eastern Region, including Sikkim, the scheme has facilitated numerous infrastructure and enterprise development projects. Its implementation is challenged by a complex mix of administrative rigidity, institutional weaknesses, geographical constraints, and socio-political realities. Overcoming these requires greater capacity building, flexibility in norms, and stronger stakeholder engagement mechanisms to realize the full potential of the scheme and achieve balanced regional development.
References
- Department of Economic Affairs. (2024). Budget Circular 2024-25. Retrieved from https://dea.gov.in/sites/default/files/Budget%20Circular%202024-25.pdf
- Government of Assam. (n.d.). Infrastructure Projects under 10% Allocation of Central Pool Fund provided for North East Region. Housing & Urban Affairs Department. Retrieved May 16, 2025, from https://dohua.assam.gov.in/portlets/infrastructure-projects-under-10-allocation-of-central-pool-fund-provided-for-north-east
- Ministry of Development of North Eastern Region. (n.d.). Rationale. Retrieved from https://mdoner.gov.in/activities/rationale
- Ministry of Housing and Urban Affairs. (n.d.). Lump Sum Provision for the Benefit of North Eastern Region including Sikkim. Retrieved from https://www.india.gov.in/lumpsum-provision-benefit-north-eastern-region-including-sikkim
- Ministry of Micro, Small & Medium Enterprises. (n.d.). Promotion of MSMEs in North Eastern Region and Sikkim. Retrieved from https://ner-promotion.msme.gov.in/NERegion/SchemeDetails.aspx
- Press Information Bureau. (2025). Specific plans/projects in North Eastern Region. Retrieved from https://www.pib.gov.in/PressReleasePage.aspx?PRID=2102675
- PRS Legislative Research. (2024). Sikkim Budget Analysis 2024-25. Retrieved from https://prsindia.org/files/budget/budget_state/sikkim/2024/Sikkim_Budget_Analysis-2024-25.pdf
- The Economic Times. (2025). Rs 5,915-Cr allocation for Ministry of DoNER. Retrieved from https://m.economictimes.com/news/economy/policy/rs-5915-cr-allocation-for-ministry-of-doner/articleshow/117834043.cms
About the Contributor
Sai Srinesh Duppati is a Research Intern at IMPRI and has recently completed his Master’s degree in Economics from Pondicherry University.
Acknowledgement
The author expresses sincere gratitude to all those who provided guidance, with special thanks to Dr Arjun Kumar and Ma’am Aasthaba Jadeja.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
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