VISVODAYA GOVERNMENT DEGREE
COLLEGE
VENKATAGIRI, TIRUPATI Dt.
Department of ‘POLITICAL SCIENCE’
Study Project of Political Science:
Center-State Relations in India
Submitted
To
G. Yugandhar
Lecturer in Political Science
By
K. Venkateswarlu
II B.A EPH
Center-State Relations in India
ABSTTRACT
In a system of multi-level governance, operating essentially in a federal frame work, like that
of India, harmonious relations between the Centre and the States are critical for the stability,
security and economic development of the country. While delineating the sphere of
governance for the two levels of government, our Founding Fathers had opted for a ‘Union of
States’ with a strong Centre to make sure that the country did not have to suffer any challenge
to its integrity again. Provisions such as, according primacy to laws passed by Parliament
over State laws, keeping residuary powers with the Centre and imposition of emergency rule
by the centre in extreme situations were incorporated as essential elements of the
Constitution, but these provisions are often misused by central government, which have lost
the faith and trust of state government. Our constitution uses the term union not the
centre .The day is bound to come when the state will repudiate the wrongful subjection by the
union and will awaken to claim their legitimate status under the constitution .The constitution
provides for a co-operative federation of states with the bias in favor of centre.
KEYWORDS Centre, State, federal, Government, etc
INTRODUCTION
The Constitution of India is federal in form but is more unitary in character.
Strengthening the federal system is necessary for meeting the aspirations of the people who
are governed through State Governments and for preserving the unity of India. Therefore,
Centre-State relations, i.e. the arrangements between the Union Government and the States in
regard to their powers, functions and responsibilities, have always been a crucial issue. The
basic structure remains to be one where legislative, administrative and financial powers are
disproportionately concentrated in the Union Government with the States having a large
number of responsibilities without sufficient autonomy. Along with significant socio-
economic and political changes occurring in the post independence period, Centre-State
relations have also undergone some changes. The period since 1991, which witnessed a
paradigm shift in the economic strategy from planned development to a market-oriented one,
has also thrown up new issues and challenges for the federal set-up. These have an important
bearing on the functioning of our democracy as well as the well being of our people. The
major areas identified at the Srinagar Conclave, which have been repeatedly endorsed by
subsequent conferences of the Chief Ministers, related to the administrative, legislative and
financial spheres. In the administrative sphere, the major issues were the abuse of Article
356, the sending of Central forces to the States without their concurrence and the role of
Governors. The major issues in the legislative sphere related to intrusions by the Centre into
State-list subjects and delays in obtaining assents for important Bills passed by the State
Assemblies. In the financial sphere, the major issues related to increasing centralization of
powers in the Union Government in matters like resource mobilization and allocation and
other key areas of economic decision-making like Planning. With the demand for
restructuring Centre-State relations gathering momentum, the Union Government had also set
up the Sarkaria Commission in 1983. While this Commission took about five years to submit
its report, its recommendations failed to resolve most of the basic issues mentioned above,
except for some minor improvements in the financial sphere, such as giving powers to the
municipalities to issue tax-free bonds, endorsing the Chief Ministers’ decisions on
consignment tax, extending slightly the time frame for over draft loans etc. It is unfortunate
that even these recommendations of the Sarkaria Commission have not been implemented by
the Union Government after nearly two decades. The constitution of the Inter-State Council
under Article 263 of the Constitution by the National Front Government in 1990 was a long
overdue step taken with the hope of resolving the major issues in Centre-State relations.
Since then, ten meetings of the Inter-State Council have been held (the last meeting was held
in December 2006) and an equal number of meetings of the Standing Committee of the
Council have taken place. But even then, not only have the major problems not been
resolved, but new problems have also emerged. Recently, the UPA Government set up a
Commission on Centre-State relations in April 2007. However, the States were not consulted
prior to the formation of this Commission. Therefore neither the terms of reference nor the
composition of the Commission reflect the pressing needs and aspirations of the States. It is
in this context that the need has arisen to once again bring the unresolved issues of Centre-
State relations to the centre-stage as well as to identify and resolve the new issues that have
emerged in the post-liberalization period. The UPA Government set up a Commission on
Centre-State Relations in April 2007 with former Chief Justice MM Punchhi as the
Chairperson. The terms of reference of the Commission, however, did not reflect the long-
standing demands of the States for greater devolution of financial powers, especially
regarding the increase of the States’ share in tax revenue, transfer of Centrally Sponsored
Schemes to the States and alleviation of the debt burden of the States. On the other hand the
terms of reference included the issue of suo moto interference on law and order and
deployment of Central forces, which is an intrusion into the jurisdiction of the States.
ADMINISTRATIVE AND LEGISLATIV RELATION
The repeated misuse by the Centre of the provisions of Article 356 of the Constitution
to dismiss State Governments and dissolve State Assemblies has been subverting the federal
principle and the rights of the States. The demand to restrict the use of Article 356 only to
cases where there is a serious threat to national unity or the secular fabric of the country has
been raised from various quarters in successive meetings of the Inter-State Council. In view
of the Supreme Court Judgment on the S. R. Bommai case, there is an urgent need to build in
strong safeguards in Articles 356 and 365 through appropriate amendments of the
Constitution. However, no decision has been taken by the Union Government in this regard.
There is also a new and alarming proposal for Central deployment of paramilitary forces in
the States unilaterally in a situation which the Centre would consider as an ‘internal
disturbance’. The provenance of Article 355 needs to be clarified.
As has been repeatedly stressed by several constituents of the Inter-State Council, the term
‘internal disturbance’ in Article 355 is related to ‘public order’, which is the first entry in the
State List. The proposal for Central deployment of paramilitary forces in a State in a situation
which the Centre would consider as “internal disturbance” without the State’s concurrence is
unacceptable. Article 355 should be amended on the lines suggested above for Article 356.
Apart from external aggression, only a serious threat to national unity or an assault on the
secular principle can be taken cognizance of.
Appointment and Role of Governors
The provision for centrally appointed Governors for the States has remained as an
anachronism, which is not in keeping with a federal democratic polity. If the post of
Governor has to be retained, then the Governor should be appointed by the President from a
list of three eminent persons suggested by the Chief Minister, satisfying the criteria
mentioned by the Sarkaria Commission. This has also been repeatedly discussed in the Inter-
State Council. None of the major countries of the world with a federal constitution have any
provision for a post of the Governor in a State to be appointed by the Centre. There should
also be a time limit with regard to Governor’s assent to Bills passed by the State Assemblies.
Moreover, the requirement of an explicit norm debarring Governors from publicly expressing
disagreements or differences with the State Government, also need to be debated. There is
also a need to review whether Governors should continue to be ex-officio Chancellors of
State Universities.
Central Intrusion into the State List
Not only have the earlier transfer of State subjects, such as education, to the
Concurrent List been left unreversed, but further intrusions have also been made into the
State List in terms of proliferation of the so-called Centrally Sponsored Schemes. These
Central schemes on the State subjects, which contain rigid guidelines imposed by the Centre,
besides having implications in the financial sphere, also impair the autonomy of the States
and affect their development priorities. There is an urgent need to review the impact of the
transfer of legislative items from the State to the Union/Concurrent List. The Union
Government has so far ignored the demand of the States to place at least the residuary powers
of legislation in the State List. The residuary power of taxation in the sphere of services is
being pre-emptorily used by the Union Government to the total exclusion of the States.
Despite discussions in the Inter-State Council, the proposal for a Constitutional amendment
to set definite time-limits for receiving the assent of Governors or the President in the case of
bills passed by the State Assemblies has so far been ignored. Moreover, there is no formal
institutional structure that requires mandatory consultation between the Centre and the States
in areas of legislation under the Concurrent List. Treaty-making Powers The present
Constitutional scheme with regard to treaty making power being exclusively in the domain of
the Union Executive needs to be urgently reviewed. The Constitution should be amended to
make legislative sanction mandatory for any international treaty. Besides, several
international treaties like the WTO agreement have serious implications for the States,
especially with respect to State subjects like agriculture. In all such cases, consultation with
the States and Concurrence of the Inter-State Council must also be made mandatory.
All-India Services
The All India Services are under the exclusive domain of the Centre. Some of the
powers can be shared with the States. The State Governments should especially have a
greater role in the administration of the Rules and Regulations of All India Services.
Special Category States
In view of their relative backwardness, the problems faced by the Special Category
States, especially the North Eastern States and Jammu & Kashmir. should be accorded
priority. The differential benefits given to these States in terms of the non-Plan Gap Grant
and Normal Central Assistance should continue and adequate resources allocated to these
States to meet their development needs. The debt of these State Governments should be
settled in a one time manner without any conditionality. The release of funds to the Special
Category States under the Centrally Sponsored Schemes should be done in a timely manner
without stringent conditions on fund utilization.
FINANCIAL RELATION
Any fair minded and impartial observer can have no doubt that having regard to the
growing responsibility of the states the distribution of taxes and revenues is very unfair to the
states too favorable to the centre. Taxes on income are levied and collected by the
government of India and distributed between the union and states ., but the expression taxes
on income does not include corporation taxes .Corporation tax means tax on income which is
payable by the companies and for which no credit is given to the shareholders who receive
dividends from the companies .As a result of changes made by the Finance Act 1959, all
income tax paid by the limited companies must now be treated as corporation tax and
consequently the states are not entitled to any share of it . Union duties of excise may be
shared between the union and states but” if only parliament by law so provides “ .The
chairman of the 4th finance commission referred to the possibility of making a constitutional
amendment placing excise duties on the same footing as income tax ,that is making excise
duties also divisible between the union and states .Even when a tax or duties is compulsorily
divisible between the centre and states, the union has the right to levy a surcharge, on income
tax exclusively for the purpose of the union .States must be given a legal right to larger share
in the tax revenues collected by the centre instead of having a rely upon the discretionary
largess of the union under article 282. The scheme of allocation of centre –state taxing power
though designed with many considerations in view –convenience, simplicity, economy, and
uniformity, yet fails to create an equilibrium between responsibilities and resources at the
state level .Most of the lucrative sources of taxation lie with the centre .Moreover ,the centre
has whole country to tap and can tax the taxing capacity existing anywhere in India .On the
other hand ,while the fiscal needs of states are huge ,because of their responsibility to provide
for development ,welfare and social service activity like education housing, health,
agriculture etc., for which there is insatiable demand in the country, their revenue raising
capacity is cabined due to many reasons ,some of which are ;
1. The economic condition prevailing within their boundaries;
2. The fact that they have to share their taxing powers with the local governments;
and,
by their taxing power being somewhat inelastic.
Other Issues
There are several other national and inter-State issues, which are important for
Centre-State relations. These include major irrigation projects, erosion of major rivers, central
investment in CPSUs, railways, national highways, ports, airports, etc. In each of these
issues, the interests of the Centre and States are involved, and it is necessary to ensure inter-
State balance in taking decisions. There are also issues like strengthening the PDS, BPL
identification and administration of the Essential Commodities Act, which have become very
relevant in the backdrop of inflation. The present scheme of the National Calamity Relief
Fund needs to be changed in order to increase the corpus of funds for the States. In view of
the inter-State competition over mineral resources, there is a need to set some common norms
regarding extraction of minerals. The royalty rates on coal and other minerals should be
revised more frequently and charged on an ad valorem basis. It is also important to involve
the State Governments in the policies of credit disbursement by the banks and financial
institutions, particularly to ensure proper allocation of priority sector lending and an inter-
State balance in the sphere of the loandisbursement. Effective resolution of these and other
issues requires robust institutional arrangements within which Centre-State and inter-State
consultations can take place on a regular basis and decisions reached.
Inter-State Council
The functioning of the Inter-State Council, which had gathered some momentum in
the earlier years, has once again lost steam. Despite the Council arriving at several decisions
regarding implementation of the Sarkaria Commission’s recommendations, they have not
been implemented by the Union Government. The decisions of the Inter-State Council
therefore have to be made binding on the Union Government, through appropriate
Constitutional amendment. All major issues involving Centre-State relations, including
legislations under the Concurrent List, have to be discussed and decided by the Inter-State
Council. The schedule of meetings of the Council as well as the Standing Committee of the
Council has to be made mandatory. The Inter- State Council should mandatorily meet twice a
year. The Secretariat of the Inter-State Council should have better representation from the
States.
NDC and Planning Commission
The National Development Council has to be developed as an effective instrument for
Centre- State co-ordination and should be given, through an appropriate amendment, a
Constitutional status as was suggested in the Srinagar Conclave. The meetings of the NDC
should be more frequent (at least once in every quarter), and its functioning should not be one
of hastily imposing a pre-conceived view of the Centre as a consensus on the States, as is
now often practiced. Instead, each issue should be discussed seriously with written notes
from the Centre and the States, and decisions should be taken democratically and
implemented expeditiously. The Planning Commission should act as an executive wing of the
NDC. Unlike the present composition of the Planning Board where members and experts are
all nominated by the Centre, there should be adequate representation of the States – both for
members as well as experts – with at least one from each region with periodic rotation among
the States in a region. The restructured Planning Commission must not act primarily as a
representative of the Centre as it is now, but should also represent fairly the interests of the
States.
Conclusion
To conclude, the ‘Union of States’ model of Indian federalism, following the events
of the eighties and early nineties, had started showing signs of both resilience and flexibility.
Although the Central Government continues to be strong and continues to maintain its pre-
eminence, attempts are in progress to strengthen the States through various federal
mechanisms. It was visualized that the system of coalition-governance at the Central level by
giving direct representation to powerful regional parties and ensuring their involvement in the
decision making on National issues was a sound step to easing of tensions between the
federal Government and the States. Through the process of economic reforms, the federal
Government started the dispensation of National power and resources to the regions. In order
to meet the imperatives of good governance, fiscal discipline on the part of the Union and the
States is also increasingly underlined.
