Welcome to a presentation on Centre-State Relations

by Dr.P.Dayachari

Are the existing arrangements governing Centre-State relations legislative, executive and financial - envisaged in the Constitution, as they have evolved over the years, working in a manner that can meet the aspirations of the Indian society as also the requirements of an increasingly globalizing world? If not, what are the impediments and how can they be remedied without violating the basic structure of the Constitution?

BASIC FEATURES OF INDIAN CONSTITUTION

Unitary or Federal

Constitutional Scheme of Centre-State Relations

Constitution Federal with a Strong Centre Quasi-federal with unitary characteristics Our founding fathers adopted an approach to make sure that the country did not have to suffer any challenge to its integrity again Centre has powers to act decisively whenever needed and particularly when there is a threat to the countrys integrity.

Constitutional Scheme of Centre-State Relations (Contd)

Primacy to laws passed by Parliament over State laws Residuary powers with the Centre Appointment of Governors of States by the President Emergency provisions in extreme situations Tax powers of the States were also relatively limited States access to borrowing from the market was subjected to Centres oversight

50s to 70s Further Centralization

Centralization of powers was accentuated due to various factors such as the predominance of a single political party at the Centre as well as in the States Adoption of planning as a strategy of national development in which investment decisions determined by the Union, albeit through a consultative process, generally set the priorities for State budgets; System of industrial licensing and control and the nationalization of major banks Judicial pronouncements during the period also tended to follow the same spirit Finance Commission appointed periodically, however, did endeavor to give evenhanded dispensation to States in the matter of revenue sharing

The 80s - Sarkaria Commission on Union-State Relations

One party rule started giving way to other parties and regional formations. The growth momentum also faltered. Some sections expressed their concern about the efficacy of overly centralized planning in sustaining growth at a rapid pace. States became vocal in their perception of the contraction of their powers and excessive use of emergency provisions by the Centre.

Sarkaria Commission Recommendations:

Out of total 247 recommendations of the Commission, the Council has so far taken decision in respect of 230 recommendations of which 152 have been implemented, 27 are at various stages of implementation and 51 recommendations have not been found acceptable Accepted recommendations The Commissions recommendation that Article 356 should be used as a measure of last resort was accepted. The Commissions recommendation that in the event of an external aggression or internal disturbance paralyzing the State Administration, all alternative courses available to the Union under Article 355 should be exhausted to contain the situation, was accepted.

Sarkaria Commission Recommendations:

Commissions recommendation that it would be desirable to have prior consultation with the State Government before deploying Union Armed Forces suo moto in aid of civil power.

The 90s and thereafter Globalization, Decentralization and Devolution

The economic crises of 1990-91 prompted acceleration of the earlier liberalization process. Controls in many areas were removed and operation of the market largely restored. More space in economic policy making was sought to be provided to the States. Countries were compelled to meet greater obligations as a result of their membership of international bodies in a fast globalizing world. The horror of terrorism around the world posed a serious threat to integrity, stability and peace for which action had to be taken through international cooperation.

The 90s and thereafter Globalization, Decentralization and Devolution

Similarly, global warming and environmental concerns stared every nation in the face calling for concerted action internationally. Inadequacy of public services in critical areas like health and education, led to the demand for greater decentralization to bring Governments closer to the people and for greater accountability Tying debt relief to enactment of fiscal responsibility laws. The proportion of central revenues transferred to the States had increased substantially as per GADGIL FORMULA over the years and dependence of relatively backward States on transfers had gone up sharply.

Second Commission on Centre-State Relations

The effect, inter alia, is that while the States feel handicapped in pursuing development programmes of their own for lack of adequate funds, The Centre finds itself hamstrung even when there is serious breakdown in law and order in some areas. The growth of the common market which is one of the main factors driving nations to come together to form federations or economic unions is unable to gain the momentum warranted by its potential, despite the mandate of freedom of trade, commerce and intercourse within the Indian Union envisaged in Article 301.

Second Commission on Centre-State Relations

Under the chairmanship of Shri Justice Madan Mohan Punchhi (Retd.),Former Chief Justice of India Are the existing arrangements governing CentreState relations legislative, executive and financial envisaged in the Constitution, as they have evolved over the years, working in a manner that can meet the aspirations of the Indian society as also the requirements of an increasingly globalizing world? If not, what are the impediments and how can they be remedied without violating the basic structure of the Constitution?

Economic and Financial Relations

After economic liberalization many of the controls and licenses have been largely done away with and the States have regained much of their economic policy making space Although the States are now expected to play an active role in promoting economic growth and poverty alleviation by providing infrastructure, delivering basic services efficiently and maintaining law and order, it is alleged, that most States have not kept pace with the reform process. It has been the practice of the Planning Commission to get Five Year Plans including the Approach papers approved by the National Development Council with a view to ensuring involvement of the States in the planning process. Besides, discussions are held by the Planning Commission every year with the States individually, to decide the size of their Annual Plans and to accord approval. The National Development Council and the Inter-State Council are among the fora available for facilitating the coordination of economic policy making and its implementation. However only limited use seems to have been made of these institutions for the purpose. Coordination is achieved more through interaction between the Central Ministries and the States.

Economic and Financial Relations

System of Inter-Governmental Transfers Transfer of funds from the Centre to the States through revenue sharing and grants with the mediation of a statutory body viz., the Finance Commission, was envisaged by the Constitution makers to redress the imbalances in the finances of the States resulting from an asymmetric assignment of financial powers and functions to the States the vertical imbalance. The disparities in the capacity of the State Governments to provide basic public services at a comparable level - horizontal imbalance - it was believed would also be alleviated through such transfers. There is widespread criticism that the funds provided by the Centre are not properly utilized by the States and there are reports of substantial leakages. In order to provide incentives to the States for better fiscal management and efficient service delivery there is a suggestion that all transfers to the States should be subjected to conditionalities and also tied to outcomes. States on the other hand argue that in their experience the funds are not released by the Central Government in a timely manner.

Economic and Financial Relations

Centrally Sponsored Schemes have emerged as an important instrument of the planning process. There is a view that such schemes may or may not be supplementing the States own Plan schemes. Substantial funds are now being transferred by the Centre directly to Panchayats, Municipalities and other agencies bypassing the States on the ground that the States have sometimes been tardy in the devolution of funds to these bodies. The States power of borrowing is regulated by Article 293 of the Constitution. Impact of the fiscal responsibility laws in your State? Scheme of Tax Assignment Fresh look to the entire scheme of assignment of tax powers between the Centre and the States? Domestic Trade Tax reform: Introduction of Tax on Goods and Services (GST)

Unified and Integrated Domestic Market

In order to foster the growth of the common market, Article 301 of the Constitution mandates that trade, commerce and intercourse within the Indian Union shall be free. However, it is stipulated that restrictions on the free movement of goods etc. may be imposed in public interest (Article 302). Invoking public interest, both the Centre and the States have imposed restrictions of various kinds on the movement of goods like food grains and so on. Besides restrictions on the movement of food grains, the impediments to the operation of a common market are imposed in several other ways such as, providing minimum price for products namely cotton or sugarcane and monopoly procurement of commodities such as cotton etc. Article 307 of the Constitution provides for the creation of an institution to oversee the operation of the mandate of a common market in the country

Local Governments and Decentralized Governance

Actual progress in the devolution of powers and responsibilities to local

Governments i.e. Panchayats and Municipalities is said to be limited and uneven. Should greater autonomy be given by the State governments to Panchayats and Municipalities for levying taxes, duties, tolls, fees etc. in specific categories and strengthening their own sources of revenue? A large number of government schemes are implemented by the Panchayats and Municipalities which are operated on the basis of various guidelines issued by the Central and State line departments. There is a view that such common guidelines are rigid and sometimes unsuited to local conditions. There are an increasing number of schemes of the Central Government for which funds go from the Centre directly to local governments and other agencies. The purpose of this is to ensure that the targeted beneficiaries of these schemes get the benefits directly and quickly.

Local Governments and Decentralized Governance

Desirability and effectiveness of the practice of direct release of funds and the role of the States in monitoring the implementation of the schemes. Instances have been reported where the State Governments have held different or even conflicting views to that of the local Governments in respect of the administration of devolved subjects Roles for the local Governments in infrastructure creation specially megaprojects which may involve acquisition of land and displacement of people in areas under the jurisdiction of the local Governments. Local Governments should have a major role to play in decision making on issues relating to management of land resources especially change of land use from agricultural to urban and industrial purposes, acquisition of land for public purposes etc., to ensure greater stakeholder participation and reduce possibilities of conflict between local, state and national interests

Criminal Justice, National Security and Centre - State Cooperation

Article 355 of the Constitution stipulates that it shall be the duty of the Union to protect every State against external aggression and internal disturbance. Although Public Order and Police come within the State List, Deployment of Central forces in any State in aid of the civil powers including jurisdiction, privileges and liabilities of members of such force while on such deployment are subjects of the Union List. In the context of recent developments of prolonged extremist violence and cross-border terrorism in certain States, the role and responsibility of the Central and State Governments to contain such disturbances have come up for examination in meetings of the Centre with the States. Maintenance of communal harmony in the country is one of the key responsibilities of both the Union and the State Governments need for classifying crimes threatening national security as a separate category requiring differential treatment. These are crimes generally masterminded by criminal syndicates across State and National boundaries using illegitimate or ostensibly legitimate channels mostly with the support of anti-national elements. This category may include crimes such as terrorist violence, economic crimes like money laundering, production and distribution of fake currency and stock market frauds, trans-national crimes like drug trafficking, arms and explosives smuggling etc..

Natural Resources, Environment, Land and Agriculture

Water as a resource, particularly river waters, is an issue of great complexity and sensitivity in terms of ownership and control, conservation, optimal and sustainable use, sharing and distribution and it is apprehended that this may result in serious tension and possible civil strife in future. Proper management of the resource requires striking a balance between national interests and the interests of the States through which the rivers flow. Nature of Centre-State cooperation in mitigating the effect of floods and management of drainage and irrigation particularly when these issues have inter-State and international implications Pollution of our rivers poses a serious threat to the quality of available water, biotic resources, human health and safety and our natural heritage. Most of the States have not taken sufficient measures to optimally utilize the nutrients present in the residue of treated sewage or in the river waters by way of sullage and sewage flowing into them (part of the solid waste settles at the river bottom and is retrievable during the period of lean flow) and recycling the available water resource to improve the fertility of soil and increase the productivity of land.

Natural Resources, Environment, Land and Agriculture

Storage or reservoir or dam based projects are often conceived as multi purpose projects providing not only power but also irrigation, navigation, drinking water and flood control benefits. At the same time such projects have higher environmental and social externalities. The issue of fair sharing of social and environmental costs and benefits between downstream/command areas and upstream/catchment areas has been a major problem leading to suboptimal utilization of this valuable resource. Some of the States have contended that they have to maintain and conserve large tracts of forests and green cover for national and global benefit at the cost of the economic interests of the State. Similarly mountain States, particularly those that are a part of the Himalayan ecosystem have to constrict the economic exploitation potential of the region for the benefit of the ecosystem as a whole. In other words, these States provide ecological services essential for the nation as a whole as well as for the entire global community. These States have argued for compensation to them and the communities who perform the role of stewardship of these valuable ecological assets. The States have been seeking a greater role in the decision making processes relating to the regulation of mineral resources e.g. in the determination of the royalty rates, periodicity of rates revision etc. Indias vulnerability to the projected impacts of climate change is high, particularly with regard to its effect on water resources, power, agriculture, forests, tourism, health and rural livelihoods etc. Most of these issues are dealt with primarily at the State and local levels.

Infrastructure Development and Mega Projects

Mega projects, such as infrastructure projects related to national/inter-State highways, river interlinking major irrigation works, large scale power generation, etc are characterized by long gestation periods, heavy capital investment requirements and complex ownership and management structures involving multiple stakeholders. These projects both in their creation and operation are dependent on smooth and well-coordinated Centre-State and inter-State relations. There are several instances of such projects getting thwarted or delayed or their operations getting affected by inter-State or Centre-State problems at a heavy cost to society. In the case of mega projects, often actions and interventions in one State impact on another. The construction of a large dam in one State, for instance, may lead to large scale displacement of people in another without commensurate benefits accruing to that State.

Socio-Political Developments, Public Policy and Governance

India is characterized by unity in diversity consistent with a pluralistic identity. Recent decades have been marked by significant increase of socio-political mobilization around sectarian identities. Socio-economic developments have resulted in large scale migration from the under developed to the better developed regions within the country. This has sometimes affected the established demographic patterns and has tended to cause social tensions. This development has serious implications for Centre-State and inter-State relations.

Social, Economic and Human Development

Development strategies, particularly those aimed at correcting regional imbalances, often require looking at the region as a whole. Regions are often defined by topographic, agro-climatic, ethno-geographic and social and cultural similarities and may comprise two or more States. There is merit in looking at the core strengths of the entire region and basing strategies on such strengths irrespective of State boundaries. This would require new forms of inter-State cooperation for synergistic development. Central sector and Centrally Sponsored Schemes is that they tend to have a uniform prescription for all situations without adequate regard to regional and local specificities and suffer from lack of flexibility Quality of education at all levels and in all fields has been a matter of concern. There is need for developing common acceptable standards and having an effective system of accreditation, certification and quality assurance systems and procedures. Challenges faced by policy planners in the country is lack of uniform social and economic measurement standards (including poverty, health, education etc.).

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