In its report submitted to Prime Minister Manmohan Singh, the second Administrative Reform Commission (ARC), headed by Veerappa Moily, has recommended the closure of the Ministry for the Development of North Eastern Region (DoNER) and the handing over of its responsibilities to the Home Ministry. This recommendation has created political confusion in the region, with some Northeastern MPs strongly opposed to it, citing its adverse effects on the economy; while a section of the leaders support the move since they are not satisfied with the functioning of the DoNER.

The ARC report states that project-monitoring from Shillong is more effective than from Delhi. Citing pubic opinion and most of the state governments' views regarding the existence of DoNER as one of the reasons to decide on its future, the ARC explained that DoNER was hampering NEC's effectiveness in dealing with matters of the Northeast. While visiting the Northeast last January and July, it felt that a cross section of the people were skeptical about the benefits of DoNER.

The Commission has also stated that after the formation of DoNER, the nodal ministries responsible for the development of water and power resources, and infrastructural development had distanced themselves from the Northeastern states, despite technical expertise in the region being limited. The tasks of DoNER involving various sectors have become difficult to carry out because the ministry lacks internal expertise to facilitate the systematic monitoring of its projects and schemes. Considering these drawbacks, the ARC recommended that the continuance of a "stand-alone" ministry with limited accountability was no longer in the interest of the region and should thus, be abolished.

DoNER was set up in September 2001 to act as the nodal department of the central government to deal with matters pertaining to the socio-economic development of the eight states of the Northeast, i.e. Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, and Sikkim. In order to do away with regional imbalances and bring the Northeastern states at par with the rest of the country, a Regional Planning Body in the form of North Eastern Council (NEC) was set up in 1972 under the Ministry of Home Affairs. It was allocated a separate budget, through which projects of an interstate nature in the region were funded by the Union Government. A Non-Lapsable Central Pool of Resources (NLCPR) was also constituted with an unspent balance of a stipulated 10 percent of the budgetary allocation of the Central Ministries for the development of the Northeast. A corpus fund was created and the new ministry for the Development of North Eastern Region was formed.

The Ministry of DoNER, since its inception, has sanctioned a number of projects of various kinds. The allocation of the NLCPR fund to its component states without particular norms had created hustle among some Northeastern states. Besides, the establishment of the Northeast Development Finance Corporation Ltd in 1995-96 - supposed to enhance the credit and deposit ratio, and fulfill credit needs - ultimately handicapped the region by making it dependent on the centre for financial assistance, and also created a new politics of economic subsidy. Transforming funds into developmental outcomes requires a variety of planned initiatives. Augmenting the capability of the people to join productively in economic activities is one of them. But the political turmoil due to economic subsidies hindered the growth of an investment-friendly environment, creating disaffection among the common people for such initiatives.

The Union government had set up the subsidy-led model of regional development to get rid of the popular perception that the centre had a step-motherly attitude towards the Northeastern region, but it has eventually become a curse on the already paralyzed economy. Although the Government of India initiated different strategies to uplift the whole region economically and socially, it has not been able to persuade Northeasterners of its commitment.

To remove the bottlenecks in regional development and generate an investment-friendly environment, the NEC needs to be invigorated, as recommended by the ARC report. The report argues that competences of DoNER - such as sanctions from the NLCPR and the monitoring of special economic packages - could be carried out by the NEC. The NEC has the responsibility of coordinating the policies of different states, supporting cooperation among states, and taking on planning for the region. It is necessary to have people with area-specialization in the various departments of the NEC.

The future of DoNER is uncertain but the dissolution of a ministry without much benefit for the region can be a pragmatic approach, provided it is compensated by the systematic strengthening of the NEC. This can be done by taking up adequate measures to develop the NEC, which is imperative in order to assume DoNER's responsibilities in case it is actually abolished. The NEC will also need to take up the task of further integrating the region into the Look East Policy, which the DoNER seems to have championed during the last three years. To make it more effective in the absence of DoNER, the NEC should develop capacity not only in coordinating policies among states, but also in preparing plans to accommodate different states through grassroots processes.