CENTRE- STATE RELATIONS

CENTRE- STATE RELATIONS

To prepare for INDIAN POLITY for any competitive exam, aspirants have to know about Centre-State Relations. It gives an idea of all the important topics for IAS Exam and the polity syllabus (GS-II.). This is an essential portion of the polity. As IAS aspirants, you should be thorough with Centre-State Relations. In this article, you can read all about the Centre-State Relations for the polity and governance segments of the UPSC syllabus.

• The Indian Constitution envisages Federal Polity with a Union government and several state governments.
• The federal system not only ensures the efficient governance of the country but also reconciles national unity with regional autonomy.
• The term ‘federation’ has nowhere been mentioned in the Constitution. Instead, 1 of the Constitution describes India as a ‘Union of States’.
• Dr B R Ambedkar preferred the phrase ‘Union of States’ rather than ‘Federation of States’ to indicate two things:

1. 1. The Indian federation is not the result of an agreement among the states (like the American federation);
   2. The states have no right to secede from the federation.

• Montagu-Chelmsford Reforms (1919) and GOI Act, 1935 prepared the ground for 3 Lists and has paved the way of federal polity.
• All in all, our India has some extraordinary power with center but is not “Nation States” but “State Nations”.
• State Reorganization Commission report concluded “union of India is the basis of our nationality and states are the limbs of the Union and limbs must be healthy and strong”.
• The Constitution of India, given its federal structure, divides all powers (legislative, executive and financial) between the Centre and the states.
• Though the Centre and the states are supreme in their respective fields, the maximum harmony and coordination between them is essential for the effective operation of the federal system.

 

The Centre-state relations can be studied under following domains:

 

LEGISLATIVE RELATIONS (Art. 245 – 255)

• 245 to 255 in Part XI of the Constitution deal with the legislative relations between the Centre and the states.
• Given federal nature of the Indian Constitution, it divides the legislative powers between the Centre and the states with respect to both the territory and the subjects of legislation.
• There are four following aspects in the Centre-states legislative relations –

 

TERRITORIAL EXTENT OF CENTRAL AND STATE LEGISLATION

• The Constitution defines the territorial limits of the legislative powers vested in the Centre and the states in the following way:

1. 1. The Parliament can make laws for the whole or any part of the territory of India (the states, the UTs, and any other area included in the territory of India)
   2. A State Legislature can make laws for the whole or any part of the state. The laws made by a state legislature are not applicable outside the state, except when there is a sufficient nexus between the state and the object.
   3. The Parliament alone can make ‘extra-territorial legislation’ – Laws of the Parliament are applicable to the Indian citizens air property in any part of the world.

• The Constitution places certain restrictions on the plenary territorial jurisdiction of the Parliament. The laws of Parliament are not applicable in the following areas:

1. 1. The President can make regulations for the peace, progress and good governance of the four UTs – Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu. A regulation so made has the same force and effect as an act of Parliament. It may also repeal or amend any act of Parliament in relation to these union territories.
   2. The Governor is empowered to direct that an act of Parliament does not apply to a Scheduled Area in the state or apply with specified modifications and exceptions.
   3. The Governor of Assam may likewise direct that an act of Parliament does not apply to a Tribal Area (autonomous district) in the state or apply with specified modifications and exceptions. President enjoys the same power with respect to Meghalaya, Tripura and Mizoram.

THEORY OF TERRITORIAL NEXUs

• The SC in H. Wadia vs ITC, Bombay has held that “the legality of any extra-territorial law can only be decided in India’s domestic courts”
• India also follows “theory of territorial nexus”, it means that “if a state law or union law has an extra-territorial effect, then it would be valid if there is sufficient nexus between object and interest of states.
• Example– If a newspaper is published in Bangalore but has a very wide circulation in Bombay then Bombay can tax that newspaper.

 

DISTRIBUTION OF LEGISLATIVE SUBJECTS (ART. 246)

• Indian Constitution provides for a division of the subjects between the Centre and the states through three lists – List-I (Union), List-II (State) and List-III (Concurrent) in the Seventh Schedule:

1. 1. The PARLIAMENT has exclusive powers to make laws with respect to the matters enumerated in the Union List. Presently, 100 Subjects (originally 97 subjects) like defence, banking, foreign affairs, currency, atomic energy, insurance, communication, inter-state trade and commerce, census, audit and so on. The matters of national importance and the matters which requires uniformity of legislation nationwide are included in the Union List.
   2. The State Legislature has, in normal circumstances exclusive powers to make laws with respect to any of the matters enumerated in the State List. This has at present 61 Subjects (originally 66 subjects) like public order, police, public health and sanitation, agriculture, prisons, local government, fisheries, markets, theatres, gambling and so on. The matters of regional and local importance and the matters which permits diversity of interest are specified in the State List.
   3. Both, the Parliament and State Legislature can make laws with respect to any of the matters enumerated in the Concurrent List. This list has at present 52 subjects (originally 47subjects) like criminal law and procedure, civil procedure, marriage and divorce, population control and family planning, electricity, labour welfare, economic and social planning, drugs, newspapers, books and printing press, and others. The matters on which uniformity of legislation throughout the country is desirable but not essential are enumerated in the concurrent list.
   4. The power to make laws with respect to Residuary Subjects is vested in the Parliament (Art. 248). This residuary power of legislation includes the power to levy residuary taxes.
   5. The 101st Amendment Act of 2016 (Goods and Services Tax) – Parliament and the state legislature have power to make laws with respect to GST imposed by the Union or by the State. Further, the Parliament has exclusive power to make laws with respect to GST where the supply of goods or services or both takes place in the course of inter-state trade or commerce.

 

The 42nd Amendment Act of 1976 transferred five subjects to Concurrent List from State List – a) Education, b) Forests, c) Weights and Measures, d) Protection Of Wild Animals and Birds, e) Administration Of Justice; constitution and organization of all courts except the Supreme Court and the high courts.

 

US – Only the powers of the Federal Government are enumerated in the Constitution and the residuary powers are left to the states. The Australian Constitution followed the same pattern. In Canada à there is a double enumeration of Federal and Provincial subjects, the residuary powers are vested in the Centre. India follows the Canadian precedent.

• The GoI Act of 1935 provided for a three-fold enumeration of the subjects – federal, provincial and concurrent. The Indian Constitution follows the scheme of this act but with one difference, that is, under GoI Act of 1935, the residuary powers were given neither to the federal legislature nor to the provincial legislature but to the Governor- General of India.
• The Constitution expressly secures the predominance of the Union List over the State List and the Concurrent List and that of the Concurrent List over the State List.
• In case of overlapping between the Union List and the State List, the former should prevail. In case of overlapping between the Union List and the Concurrent List, it is again the former which should prevail. Where there is a conflict between the Concurrent List and the State List, it is the former that should prevail.
• In case of a conflict between the Central law and the state law on a subject enumerated in the Concurrent List, the Central law prevails over the state law. But, there is an exception – If the state law has been reserved for the consideration of the President and has received his assent, then the state law prevails in that state. However, it would still be competent for the Parliament to override such a law by subsequently making a law on the same matter.

 

 

PARLIAMENTARY LEGISLATION IN THE STATE FIELD (ART. 249)

• The below scheme of distribution of legislative powers between the Centre and the states is to be maintained in normal times.
• But, in abnormal times, the scheme of distribution is either modified or suspended.

Article	Description
Art. 246A	Parliament and state legislature has the power to make law for union or state GST respectively.
Art. 249	Parliament (Rajya Sabha ) can legislate on state list in the national interest.
Art. 250	Parliament can legislate if there is Emergency.
Art. 252	Parliament can legislate for 2 or more states by their consent.
Art. 253	Parliament can make law to give effect to International Agreements.
Art. 256	State executive should comply to all laws made by Parliament.
Art. 200	Assent to bills and reservation of money/finance bills for President’s consideration.
Art. 356	State emergency (President’s rule)
Art. 360	Financial emergency

 

• The Constitution empowers the Parliament to make laws on any matter enumerated in the State List under the following five extraordinary circumstances:

 

1. When Rajya Sabha Passes a Resolution

• • If the Rajya Sabha states that it is necessary in the national interest that Parliament should make laws on a matter in the State List, then the Parliament becomes competent to make laws on that matter.
  • Such a resolution must be supported by two-thirds of the members present and voting.
  • The resolution remains in force for one year; it can be renewed any number of times but not exceeding one year at a time.
  • The laws cease to have effect on the expiration of six months after the resolution has ceased to be in force.
  • This provision does not restrict the power of a state legislature to make laws on the same matter.
  • But, in case of inconsistency between a State Law and a Parliamentary Law, the latter is to prevail.

 

2. During a National Emergency (Art. 352)

• • The Parliament acquires the power to legislate with respect to matters in the State List, while a proclamation of national emergency is in operation.
  • The laws become inoperative on the expiration of six months after the emergency has ceased to operate.
  • In above case, the power of a State Legislature to make laws on the same matter is not restricted.
  • In case of repugnancy between a state law and a parliamentary law, the latter is to prevail.
  • The laws cease to have effect on the expiration of six months after the resolution has ceased to be in force.

 

3. When States Make a Request

• • When the legislatures of two or more states pass resolutions requesting the Parliament to enact laws on a matter in the State List, then the Parliament can make laws for regulating that matter.
  • A law so enacted applies only to those states which have passed the resolutions.
  • Any other state may adopt it afterwards by passing a resolution to that effect in its legislature.
  • Such a law can be amended or repealed only by the Parliament and not by the legislatures of the concerned states.
  • In case of request by states, the State Legislature ceases to have the power to make a law with respect to that matter.
  • Some examples of laws passed under the above provision are Wild Life (Protection) Act, 1972; Water (Prevention and Control of Pollution) Act, 1974; Urban Land (Ceiling and Regulation) Act, 1976; and Transplantation of Human Organs Act, 1994.
  • Clinical Establishments Registrations and regulations Act, 2010 has been made for 4 states (Sikkim, Mizoram, Arunachal Pradesh and Himachal Pradesh)

4. During President’s Rule (Art. 356)

• • When the President‘s rule is imposed in a state, the Parliament becomes empowered to make laws with respect to any matter in the State List in relation to that state.
  • A law made so by the Parliament continues to be operative even after the President‘s rule and not co- terminus with the duration of the President‘s rule.
  • Such a law can be repealed or altered or re-enacted by the state legislature.

5. To Implement International Agreements

• • The Parliament can make laws on any matter in the State List for implementing the international treaties, agreements or conventions.
  • This provision enables the Central government to fulfill its international obligations and commitments.
  • Punchhi Commission has said that treaties which impinge on state list must be negotiated with increasing involvement of states
  • Examples – United Nations (Privileges and Immunities) Act, 1947; Geneva Convention Act, 1960; Anti-Hijacking Act, 1982 and legislations relating to environment and TRIPS.

 

CENTRE’S CONTROL OVER STATE LEGISLATION

• Besides the Parliament’s power to legislate directly on the state subjects under the exceptional situations, the Constitution empowers the Centre to exercise control over the state’s legislative matters in the following ways:

1. 1. The governor can reserve certain types of bills passed by the state legislature for the consideration of the President. The President enjoys absolute veto over state bills.
   2. Bills on certain matters enumerated in the State List can be introduced in the state legislature only with the previous sanction of the President – E.g. bills imposing restrictions on the freedom of trade and commerce
   3. The Centre can direct the states to reserve money bills and other financial bills passed by the state legislature for the President’s consideration during a financial emergency.

• The Indian Constitution has assigned a position of superiority to the Centre in the legislative sphere.

 

ARTICLES PERTAINING TO LEGISLATIVE RELATIONS

Article	Description
Art. 245	Extent of laws made by Parliament and by the Legislatures of States
Art. 246	Subject-matter of laws made by Parliament and by the Legislatures of States
Art. 247	Power of Parliament to provide for the establishment of certain additional courts
Art. 248	Residuary powers of legislation
Art. 249	Power of Parliament (Rajya Sabha) to legislate with respect to a matter in the State List in the national interest.
Art. 250	Power of Parliament to legislate with respect to any matter in the State List if a Proclamation of Emergency is in operation
Art. 251	Inconsistency between laws made by Parliament under Articles 249 and 250 and laws made by the Legislatures of States
Art. 252	Power of Parliament to legislate for two or more States by consent and adoption of such legislation by any other State
Art. 253	Legislation for giving effect to international agreements
Art. 254	Inconsistency between laws made by Parliament and laws made by the Legislatures of States
Art. 255	Requirements as to recommendations and previous sanctions to be regarded as matters of procedure only

 

 

INTERPRETATION OF THE STATE LIST

• Supreme Court in Calcutta Gas ltd vs State of West Bengal has held that “widest possible and most liberal” interpretation should be given to the language of each entry of the constitution.
• In International tourism corporation vs State of Haryana, SC has said that “Residuary power given to union should not affect and jeopardies the federal polity”.
• In D. Joshi vs Ajit Mills, the SC has said that “Entries in concurrent lists must be given wide meaning implying all ancillary and incidental powers”.

DOCTRINE OF PITH AND SUBSTANCE

• Pith and substance means “true object of the legislation and competence” of the legislature which enacted it.
• General Rule à Union and States are supreme in their respective spheres (Lists) and they should not encroach into other’s sphere.
• In some instances, a law passed by one encroaches upon the field assigned to another, in such case the Court will apply this doctrine.
• Example– A law can be held intra vires even though it incidentally trances on other.
• In S. Krishna v. State of Madras (1957), SC has held that, “In order to ascertain the true character of the legislation, one must have regard to”-
  • Whole enactment
  • Underlying objective
  • Scope and effect of its provision

 

DOCTRINE OF COLOURABLE LEGISLATION

• This doctrine also known as fraud on the constitution.
• Doctrine of Colorable Legislation is built upon the founding stones of the “Doctrine of Separation of Power”.
• Separation of Power mandates that a balance of power is to be struck between the different components of the Statee. between the Legislature, the Executive and the Judiciary.
• The Primary Function of the legislature is to make laws. Whenever, Legislature tries to shift this balance of power towards itself, the Doctrine of Colorable Legislation is invoked to take care of Legislative Accountability.
• In C.G. Narayan Dev vs State of Orissa (1953) judgement, the SC explained the meaning, scope of this doctrine as “when anything is prohibited directly, it is also prohibited indirectly”. In common parlance, it is meant to be understood as “Whatever legislature can’t do directly, it can’t do indirectly”.
• The SC in different judicial pronouncements has laid down the certain tests in order to determine the true nature of the legislation impeached as colourable :-
  • The court must look to the substance of the impugned law, as distinguished from its form or the label which the legislature has given it. For the purpose of determining the substance of an enactment, the court will examine two things :- 1. Effect of the legislature and 2. Object and the purpose of the act.
  • The doctrine of colourable legislation has nothing to do with the motive of the legislation, it is in the essence a question of vires or power of the legislature to enact the law in question.
  • The doctrine is also not applicable to Subordinate Legislation.

TESTS TO CHECK REPUGNANCY BETWEEN LAWS:

 

1.Direct conflict test

• There is direct conflict between state law and the central law.
• Example– Central law says do but the state act says don’t then here there is directly and clearly conflict between two laws.
• Here court will act as per the situation.

 

2. Doctrine of occupied field

• GENERAL RULE – Even where there is no repugnancy between a Union law and a State law, the Union law will not allow a State law to co-exist if the Parliament intended to occupy the whole field relating to the subject
• g. – An Assam Act provided that a person may be appointed as a member of an Industrial Tribunal only in consultation with the High Court. Later, Parliament made a law which stated only the qualifications and did not mention consultation with High Court. It was held the Central legislation was indeed to be an exhaustive code and no consultation was required.
• In Deep Chand case the SC held that, the intention of Parliament while enacting the Motor Vehicles Amending Act, 1956 was to occupy the whole field of nationalization of motor transport. Hence, the U.P. Act providing for nationalization of transport services could not co-exist.

3. Intended occupation test

• Here test arises with intention of the legislature.
• E.g.- Parliament has given an exhaustive code for a particular matter by replacing the state law then here Parliament has intention to do so.

 

DOCTRINE OF READING DOWN

• When a Legislature has used wide or vague words which may extend the operation of an act to a subject outside the relevant entry, court then interprets the wide terms giving them restricted meaning. This is called reading down.
• The Act with the meaning assigned remains intra vires. The courts avoid striking down an Act.

 

LIMITATIONS ON LEGISLATIVE POWERS

• 245 – Extent of laws made by Parliament and by the Legislatures of States
• Requirements of prior sanctions on specific subjects
• Legislation must not be fraud on the constitution
• Doctrine of colourable legislation
• Legislature cannot delegate matter of policy to the executive, only the powers to fill in the details can be delegated.

 

CRITICAL ANALYSIS OF LEGISLATIVE RELATIONS

• Essential legislative functions cannot be delegated by the legislature.
• The center has practically monopolized the Central list. Several states want reduction in Central Lists and transform them to state list. West Bengal and Punjab center should confine itself to just four subjects- Defense, foreign affairs, communication and currency.
• State fears the abuse of Art. 200 (here only 4-6 months’ time should be given to center) and Art. 249 (National interest)
• Residuary powers should come to Concurrent list.
• Taxation should remain with centre.
• There should be equal representation for states in Rajya Sabha
• Restore domicile qualification in Rajya Sabha.
• There should be broad agreement between center and state before introducing concurrent subjects bills.
• There should be liberal use of Art. 254 (inconsistency between state and parliament law)
• Sometime Parliament can make Skeletal Laws leaving rooms for States to fill up the detail.

 

PROBLEMS IN LEGISLATIVE RELATIONS OF CENTRE-STATE

• States like Punjab and West Bengal demanded that centre should confine itself to only four subjects – Currency, General Communication, External affairs and Defense.
• Abuse of Art. 200 – assent to bills and reservation of money/finance bills for presidents consideration.
• Strong centre is desirable but issue is with over-centralisation.
• Several states sought abolition or reduction of subjects enumerated in concurrent list and transferring some of them to state list.
• Residuary powers must be rest with the state or they should be treated as concurrent items.
• Some states feared of abuse of Art. 249 – Power of Parliament (Rajya Sabha) to legislate with respect to a matter in the State List in the national interest.

 

SARKARIA COMMISSION RECOMMENDATIONS

• Residuary w.r.t. taxation should remain with union.
• Concurrent list should be retained,
• Centre should occupy only those subjects of concurrent list which demands nationwide uniformity.
• Fears of the states w.r.t. Art. 249 are baseless.
• As far as Art. 200 is concerned, the centre should dispose of these bills within four months.

 

PUNCHHI COMMISSION RECOMMENDATIONS

• Equal representation of the states in Rajya Sabha.
• Domicile qualification for the Rajya Sabha should be restored.
• Broad agreement should be reached between the centre and state before introducing a bill on subjects in concurrent list.
• Greater flexibility must be shown to the state w.r.t. five transferred subjects (by 42^nd amendment – Education, Forests, Weights and Measures, Protection Of Wild Animals and Birds, and Administration Of Justice)
• Centre should examine whether administration of five subjects under central laws has served its intended purpose and if not, subjects must be restored in state list.

 

ADMINISTRATIVE RELATIONS (Art. 256-263)

• Articles spanning from 256 to 263 in Part XI of the Constitution deal with the administrative relations between the Centre and the states. In addition, there are various other articles pertaining to the same matter.
• The scheme of allocating an administrative responsibilities is drawn for the purpose of :
  • The administration of law
  • Achieving coordination between the centre and state
  • The settlement of disputes between the centre and state

 

WHY PROVISION FOR ADMINISTRATIVE RELATIONS?

• SC in Atiabari tea company v. State of Assam 1951 has said that “success and strength of federal policy depends on the maximum of cooperation and coordination between all the governments”.
• To ensure smooth and proper functioning of the administrative machinery at union and state levels, constitution embodies provisions to deal with all sorts of eventualities emerging as a result of the operation of federal system.
• According to Kautilya – the foundation of the government lies to frame policy and administration of its day to day business.
• The Indian citizens live in the territory where both laws of the government are applicable to him. All executive, legislative and financial actions of both the governments are attributed to him.
• So the purpose of the country’s administration is only duly served when there is a viable relationship between the center and state.

IMPORTANT ARTICLES PERTAINS TO ADMINISTRATIVE RELATIONS

Article	Description
Art. 256	Obligation of States and the Union
Art. 257	Control of the Union over States in certain cases
Art. 258	Power of the Union to confer powers, on States in certain cases
Art. 258A	Power of the States to entrust functions to the Union
Art. 260	Jurisdiction of the Union in relation to territories outside India
Art. 261	Public acts, records and judicial proceedings
Art. 262	Adjudication of disputes relating to waters of inter-State rivers or river valleys
Art. 263	Provisions with respect to an inter-state Council

 

DISTRIBUTION OF EXECUTIVE POWERS

• The executive power has been divided between the Centre and the states on the lines of the distribution of legislative powers, except in few cases.
• Thus, the executive power of the Centre extends to the whole of India:

1. 1. to the matters on which the Parliament has exclusive power of legislation (Union List);
   2. to the exercise of rights, authority and jurisdiction conferred on it by any treaty or agreement. Similarly, the executive power of a state extends to its territory in respect of matters on which the state legislature has exclusive power of legislation (State List).

• A law on a matters in concurrent subject, though enacted by the Parliament, is to be executed by the states except when the Constitution or the Parliament has directed otherwise.
• The executive power of a state extends to its territory in respect of matters on which the state legislature has exclusive power of legislation (State List).

 

OBLIGATION STATE AND CENTRE (ART. 256)

• 256 – Power of state should be exercised to ensure compliance to laws of the Parliament and GOI can also give direction for that.
• The Constitution has placed two restrictions on the executive power of the states in order to give ample scope to the Centre for exercising its executive power in an unrestricted manner –

1. 1. As to ensure compliance with the laws made by the Parliament and any existing law which apply in the state (general obligation upon the state)
   2. As not to impede or prejudice the exercise of executive power of the Centre in the state (specific obligation on the state)

• 365 – Where any state has failed to comply with any directions given by the Centre, it will be lawful for the President to hold that a situation has arisen in which the government of the state cannot be carried on in accordance with the provisions of the Constitution.

 

CENTRE’S DIRECTION TO STATE IN CERTAIN CASES (ART.257)

• As per 257 the Centre is empowered to give directions to the states with regard to the exercise of their executive power in the following matters:

1. 1. the construction and maintenance of means of communication (declared to be of national or military importance) by the state;
   2. the measures to be taken for the protection of the railways within the state;
   3. the provision of adequate facilities for instruction in the mother- tongue at the primary stage of education to children belonging to linguistic minority groups in the state; and
   4. the drawing up and execution of the specified schemes for the welfare of the Scheduled Tribes in the state.

• 257 also mentioned that “state should not prejudice or impede Union executive power”.
• The coercive sanction behind the Central directions under 365 is also applicable in these cases.

 

MUTUAL DELEGATION OF FUNCTIONS (ART. 258 AND 258A)

• The distribution of legislative powers between the Centre and the states is rigid.
• The Centre cannot delegate its legislative powers to the states and a single state cannot request the Parliament to make a law on a state subject.
• The distribution of executive power in general follows the distribution of legislative powers.
• The rigid division in the executive sphere may lead to occasional conflicts between the two.
• To promote harmony, the Constitution provides for inter-government delegation of executive functions in order to mitigate rigidity and avoid a situation of deadlock.
• 258 – Union can confer powers to states in some cases.
• Accordingly, the President with the consent of the state government, entrust to that government any of the executive functions of the Centre.
• Conversely, the Governor of a state, with the consent of the Central government, entrust to that government any of the executive functions of the state. This mutual delegation of administrative functions may be conditional or unconditional.
• The Parliament can delegate and entrust the executive functions of the Centre to a state without the consent of that state.

In 1947, Indian Civil Service (ICS) was replaced by IAS and the Indian Police (IP) was replaced by IPS and were recognised by the Constitution as All-India Services. In 1966, the Indian Forest Service (IFS) was created as the third All-India Service.

• Hence, a law made by the Parliament on a subject of the Union List can confer powers and impose duties on a state, or authorise the conferring of powers and imposition of duties by the Centre upon a state (irrespective of the consent of the state concerned). Notably, the same thing cannot be done by the state legislature.
• The mutual delegation of functions between the Centre and the state can take place either under an agreement (this method can only be use by the state) or by a legislation.

 

COOPERATION BETWEEN CENTRE AND STATE

• The Constitution contains the following provisions to secure cooperation and coordination between the Centre and the states:

1. 1. Full faith and credit is to be given throughout the territory of India to public acts, records and judicial proceedings of the Centre and every state. ( 261)
   2. The Parliament can provide for the adjudication of any dispute or complaint with respect to the use, distribution and control of waters of any inter-state river and river valley. ( 262)
   3. The President can establish an Inter-State Council to investigate and discuss subject of common interest between the Centre and the states. Such a council was set up in 1990. ( 263)
   4. The Parliament can appoint an appropriate authority to carry out the purposes of the constitutional provisions relating to the interstate freedom of trade, commerce and intercourse. (Art. 301). But, no such authority has been appointed so far.

a. All India Service

• 312 – Authorizes the Parliament to create new All-India Services on the basis of a Rajya Sabha resolution to that effect.
• All India services are controlled jointly by the Centre and the states. The ultimate control lies with the Central government while the immediate control vests with the state governments.
• Each of these three all-India services, form a single service with common rights and status and uniform scales of pay throughout the country, irrespective of their division among different states.
• Though the all-India services violate the principle of federalism under the Constitution by restricting the autonomy and patronage of the states, they are supported on the ground that –

1. They help in maintaining high standard of administration in the Centre as well as in the states;
2. They help to ensure uniformity of the administrative system throughout the country;
3. They facilitate liaison, cooperation, coordination and joint action on the issues of common interest between the Centre and the states.

 

b. Public service commission

In the field of public service commissions, the Centre-state relations are as follows:

1. The Chairman and members of a state public service commission, though appointed by the governor of the state, can be removed only by the President.
2. The Parliament can establish a Joint State Public Service Commission (JSPSC) for two or more states on the request of the state legislatures The chairman and members of the JSPSC are appointed by the president.
3. The Union Public Service Commission (UPSC) can serve the needs of a state on the request of the state governor and with the approval of the President.
4. The UPSC assists the states (when requested by two or more states) in framing and operating schemes of joint recruitment for any services for which candidates possessing special qualifications are required.c

 

c. Integrated judicial system

• Although India has a federal setup, there is no dual system of administration of justice. The Constitution established an integrated judicial system with the Supreme Court at the top and the State High courts below This single system of courts enforces both the Central laws as well as the state laws. This is done to eliminate diversities in the remedial procedure.
• The Parliament can establish a common high court for two or more states. Example- Maharashtra and Goa or Punjab and Haryana have a common high court.

RELATIONS DURING EMERGENCIES

• National Emergency (Art. 352) – the Centre becomes entitled to give executive directions to a state on ‘any’ matter. Thus, the state governments are brought under the complete control of the Centre, though they are not suspended.
• President’s Rule (Art. 356) – the President can assume to himself the functions of the state government and powers vested in the Governor or any other executive authority in the state.
• Financial Emergency (Art. 360) – the Centre can direct the states to observe canons of financial propriety and can give other necessary directions including the reduction of salaries of persons serving in the state.

 

OTHER PROVISIONS

• The Constitution contains the following other provisions which enable the Centre to exercise control over the state administration:

1. 1. 355 imposes two duties on the Centre:

(a) to protect every state against external aggression and internal disturbance;

(b) to ensure that the government of every state is carried on in accordance with the provisions of the Constitution.

1. 2. Appointment of Governor of a state by the president. He holds office during the pleasure of the President. The governor acts as an agent of the Centre in the state. He submits periodical reports to the Centre about the administrative affairs of the state.
   3. The State Election Commissioner is appointed by the governor of the state, can be removed only by the President.

EXTRA-CONSTITUTIONAL DEVICES TO FOSTER CENTRE-STATE RELATIONS

• There are extra-constitutional devices to promote cooperation and coordination between the Centre and the States. These consist of a number of advisory bodies and conferences held at the Central level.
• Example – NITI Aayog, the Zonal Councils, the North Eastern Council, University Grants Commission etc.
• The important conferences held either annually or otherwise to facilitate Centre-state consultation on a wide range of matters are as follows:

1. 1. The governors’ conference (presided over by the President).
   2. The chief ministers’ conference (presided over by the prime minister).
   3. The chief justices’ conference (presided over by the chief justice of India).
   4. The conference of vice-chancellors.
   5. The home ministers’ conference (presided over by the Central home minister)

MAJOR ISSUE OF ADMINISTRATIVE RELATIONS

• There is heavy abuse of Art. 356 and it should be curtailed
• Management of All India Service.
• Position, appointment and role of governor.
• Central administrative directions to the states.
• Binding nature of the schemes on the states.

 

PUNCHHI COMMISSION RECOMMENDATIONS

• The constitution has provided limited institutional mechanisms for inter-state and centre-state coordination and even they are underutilized.
• Set up new All India Service in other domains– Judiciary, Education, Health as well.
• Interstate council should be strengthen in dispute settlement .
• Zonal council must meet at least twice a year.
• There should be rejuvenation of NIC

 

FINANCIAL RELATIONS (Art. 256-291)

• Articles spanning from 268 to 293 in Part XII of the Constitution deal with Centre – state financial relations.
• All the levels of the government must have adequate finance at their disposal.
• If the legislative and administrative authority of the center and states has to be maintained then they must be financially autonomous.
• In Canada and Australia– central grants to states are must for the states to survive.
• Swiss Constitution makes center subservient to states.
• American Constitution wants financial independence between states and center but their also states rely on centre’s grant-in-aid.
• Indian constitution does not give a watertight division of financial resources but wants to secure equitable distribution.

 

EVOLUTION OF FINANCIAL RELATIONS

• In 1870 Lord Mayo introduced “devolution scheme” which for the first time initiated financial relations between GOI and government of constituent units.
• Income Tax was levied much before GOI Act, 1919 and was shared between central and provincial governments.
• GOI Act 1919 failed to do a rigid divisions between revenues of the governments but introduced revenue heads for governments (under dyarchy).
• Meston Award of 1920s said “administration and finance need not be with the same authority”
• GOI Act, 1935 recognized that certain taxes other than IT may also be collected by central government and shared with the provincial governments.

 

EVOLUTION OF FINANCIAL RELATIONS

• There should be resource-responsibility parity.
• Lower levels of federal units should be able to raise resources independently.
• Elasticity of expenditure and income.
• Equalization of transfer both horizontally and vertically between states
• Efficiency should be ensured in resource utilization.
• Accountability

TAXATION ONLY BY AUTHORITY OF LAW (ART.265)

• 265 – Taxes not to be imposed save by authority of law – “No tax shall be levied or collected except by authority of law”.
• No tax can be imposed by an executive order.
• The law providing for imposition of tax must be a valid law (Chotabhai vs. Union of India 1962).
• Example– A tax law would be void if it violates fundamental right to equality.
• Legislature can also impose tax twice on a thing. It is Double taxation (Avinder Singh vs. State of Punjab 1979).

 

CONSOLIDATED FUND (ART.266)

• 266– There will be Consolidated fund for India and Consolidated fund of State.
• Consolidated Fund of India is related to all revenues received by the government and expenses made by it, excluding the exceptional items.
• All revenues received by the government by way of direct taxes and indirect taxes, money borrowed and receipts from loans given by the government flow into the Consolidated Fund of India.
• All government expenditure is made from this fund, except exceptional items (which are met from the Contingency Fund or the Public Account)
• Importantly, no money can be withdrawn from this fund without the Parliament’s approval.

 

CONTINGENCY FUND (ART.267)

• 267(1) – Established Contingency Fund of India.
• It is in the nature of an imprest (money maintained for a specific purpose). Accordingly, Parliament enacted the Contingency fund of India Act 1950.
• The fund is held by the Finance Secretary (Department of Economic Affairs) on behalf of the PRESIDENT OF INDIA and it can be operated by executive action.
• The Contingency Fund of India exists for disasters and related unforeseen expenditures.
• Contingency Fund of each State Government is established under 267(2) of the Constitution .It is held by GOVERNOR and corpus varies from state to state (Legislature).

SOURCES OF REVENUES

Union Govt.	State Govt.
Custom and excise duty	Grants under Art. 275
Income tax	Devolution on recommendations of Finance commission
Corporation tax	Provisions of CAG
Estate duty (except agriculture)	Toll tax, vehicle tax
Excise duty on tobacco and other intoxicants	Tax on minerals
Succession duty (except agriculture)	Entertainment tax
Inter-state trade tax	Housing taxes

 

IMPORTANT ARTICLES

Article	Description
Art. 268	Duties levied by the Union but collected and appropriated by the states
Art. 269	Taxes levied and collected by the Union but assigned to the states
Art. 269A	Levy and collection of goods and services tax in course of inter-state trade or commerce
Art. 270	Taxes levied and distributed between the Union and the states
Art. 271	Surcharge on certain duties and taxes for purposes of the Union
Art. 274	Prior recommendation of President required to bills affecting taxation in which states are interested
Art. 275	Grants from the Union to certain states
Art. 279A	Goods and Services Tax Council
Art. 280	Finance commission
Art. 285	Exemption of property of the Union from state taxation
Art. 289	Exemption of property and income of a state from Union taxation
Art. 292	Borrowing by the Government of India
Art. 293	Borrowing by states

 

ALLOCATION OF TAXING POWERS

List	Subjects
Union List	-It contains 97 subjects of national importance such as defence, railways, currency, foreign affairs, post, among others. -On this list, only parliament can make laws.
State List	-It comprises of 66 subjects of local importance such as police, agriculture, health, among others. -State legislature make laws on this subjects.
Concurrent List	-It has 47 subjects of common concern to both centre and state govt. like marriage, social securities, etc. -Both parliament and state legislature can make laws on this subjects. -If conflict arises, then central legislation will prevail.

 

• Centre list – The Parliament has exclusive power to levy taxes on subjects enumerated in the Union List (which are 13 in number).
• State list – The state legislature has exclusive power to levy taxes on subjects enumerated in the State List (which are 18 in number).
• Concurrent list – There are no tax entries in the Concurrent List. In other words, the concurrent jurisdiction is not available with respect to tax legislation.

The residuary power of is vested in the Parliament. Under this provision, the Parliament has imposed gift tax, wealth tax and expenditure tax.

• But, the 101st Amendment Act of 2016 has made an exception by making a special provision with respect to GST. This Amendment has conferred concurrent power upon Parliament and State Legislatures to make laws governing GST.
• The Constitution also draws a distinction between the power to levy and collect a tax and the power to appropriate the proceeds of the tax so levied and collected.

 

RESTRICTIONS ON THE TAXING POWERS OF THE STATE

• A state legislature can impose taxes on professions, trades, callings and employments. But, the total amount of such taxes payable by any person should not exceed ₹2,500 per annum.
• A State Legislature can Impose Taxes On the Sale Or Purchase of goods (other than newspapers). But, this power of the states to impose sales tax is subjected to following restrictions –

1. 287- A State Legislature can impose tax on the consumption or sale of electricity. But, no tax can be imposed on the consumption or Sale of Electricity which is (a) Consumed by the Centre or sold to the Centre; or (b) Consumed in the construction, maintenance or operation of any railway by the Centre or by the concerned railway company or sold to the Centre or the railway company for the same purpose.
2. 288 – A State Legislature can impose a tax in respect of any water or electricity stored, generated, consumed, distributed or sold by any authority established by Parliament for regulating or developing any Inter- state River or River Valley. However, such a law, to be effective, should be reserved for the president‘s consideration and receive his assent.

 

DISTRIBUTION OF TAX REVENUE

• The 80th Amendment Act of 2000 and the 101st Amendment Act of 2016 have introduced major changes in the scheme of the distribution of tax revenues between the centre and the states.
• 80th Amendment – Enacted to give effect to the recommendations of the 10th Finance Commission. The Commission recommended ‘Alternative Scheme of Devolution’ which states that out of the total income obtained from certain central taxes and duties, 29% should go to the states.
• 101st Amendment – paved the way for the introduction of a new indirect tax regime – GST. Accordingly, the Amendment conferred concurrent taxing powers upon the Parliament and the State Legislatures to make laws for levying GST on every transaction of supply of goods or services or both. The Amendment provided for subsuming of various central indirect taxes and levies such as – Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Central Surcharges and Cesses so far as they related to the supply of goods and services.
• Further, 101st Amendment removed Art. 268-A as well as Entry 92-C in the Union List, both were dealing with service tax (added earlier by the 88th Amendment Act of 2003).
• After the 80th and 101st Amendment, the present position with respect to the distribution of tax revenues between the centre and the states is as follows:

A. Taxes Levied by the Centre but Collected and Appropriated by the States (Art. 268):

• • This category includes the stamp duties on bills of exchange, cheques, promissory notes, policies of insurance, transfer of shares and others.
  • The proceeds of these duties levied within any state do not form a part of the Consolidated Fund of India, but are assigned to that state.

 

B. Taxes Levied and Collected by the Centre but Assigned to the States (Art 269):

1. 1. Taxes on the sale or purchase of goods (other than newspapers) in the course of inter-state trade or commerce.
   2. Taxes on the consignment of goods in the course of inter-state trade or commerce.

• The net proceeds of these taxes do not form a part of the Consolidated Fund of India. They are assigned to the concerned states in accordance with the principles laid down by the Parliament.

 

C. Levy and Collection of GST in Course of Inter-State Trade or Commerce (Art 269A):

• The Goods and Services Tax (GST) on supplies in the course of inter-state trade or commerce are levied and collected by the Centre. However, this tax is divided between the Centre and the States in the manner provided by Parliament on the recommendations of the GST Council.
• The Parliament is also authorized to formulate the principles for determining the place of supply, and when a supply of goods or services or both takes place in the course of inter-state trade or commerce.

 

D. Taxes Levied and Collected by the Centre but Distributed between the Centre and the States (Art 270): This category includes all taxes and duties referred to in the Union List except the following:

1. Duties and taxes referred to in Art. 268, 269 and 269-A;
2. Surcharge on taxes and duties referred to in Art 271;
3. Any cess levied for specific purposes.

• The manner of distribution of the net proceeds of these taxes and duties is prescribed by the President on the recommendation of the Finance Commission.

 

E. Surcharge on Certain Taxes and Duties for Purposes of the Centre (Art 271):

• The Parliament can at any time levy the surcharges on taxes and duties referred to in Art. 269 and 270.
• The proceeds of such surcharges go to the Centre exclusively (it should be noted that states have no share in these surcharges)
• However, GST is exempted from this surcharge (surcharge cannot be imposed on the GST)

 

F. Taxes Levied and Collected and Retained by the States:

• These are the taxes belonging to the states exclusively. They are enumerated in the state list and are 18 in total. Some important of these are:

1. 1. land revenue;
   2. taxes on agricultural income, succession and estate duties in respect of agricultural land;
   3. taxes on lands and buildings, on mineral rights, on animals and boats, on road vehicles, on luxuries, on entertainments, and on gambling;
   4. excise duties on alcoholic liquors for human consumption and narcotics;
   5. Taxes on the Entry Of Goods into a Local Area, on Advertisements (except newspapers), on consumption or sale Of Electricity, and on goods and passengers carried by road or on Inland Waterways;
   6. Taxes On Professions, trades, callings and employments not exceeding Rs. 2,500 per annum;
   7. Capitation Taxes;
   8. Tolls;
   9. Stamp Duty on Documents (except those specified in the Union List);
   10. Sales Tax (other than newspaper); and
   11. Fees on the matters enumerated in the state list (except court fees).

DISTRIBUTION OF NON-TAX REVENUE

The Centre	The States
Posts and telegraphs	Irrigation
Railways	Forests
Banking	Fisheries
Broadcasting	State Public Sector Enterprises
Coinage and currency	Escheat and lapse
Central public sector enterprises	Others
Escheat and lapse
Others

 

GRANTS IN AID

The Constitution provides for grants-in-aid to the states from the Central resources. There are two types of grants-in-aid –

Statutory grants

Discretionary grants

Art. 275 empowers the Parliament to make grants to the states which are in need of financial assistance and not to every state. These sums are charged on the Consolidated Fund of India every year.   The Constitution also provides for specific grants for promoting the welfare of the scheduled tribes in a state or for raising the level of administration of the scheduled areas in a state (including the State of Assam)   The statutory grants under Art. 275 are given to the states on the recommendation of the Finance Commission.

Art 282 empowers both the Centre and the states to make any grants for any public purpose, even if it is not within their respective legislative competence.   These grants are also known as discretionary grants, the reason being that the Centre is under no obligation to give these grants and the matter lies within its discretion.   These grants are to help the state financially to fulfil plan targets and to give some leverage to the Centre to influence and coordinate state action to effectuate the national plan.

 

OTHER GRANTS

• The Constitution also provided for a third type of grants-in-aid, but for a temporary period.
• A provision was made for grants in lieu of export duties on jute and jute products to the States of Assam, Bihar, Orissa and West Bengal.
• These grants were to be given for a period of ten years from the commencement of the Constitution.
• These sums were charged on the Consolidated Fund of India and were made to the states on the recommendation of the Finance Commission.

 

GST COUNCIL (ART. 279-A)

• The effective and efficient administration of the GST requires a co-operation and co-ordination between the Centre and the States.
• The 101st Amendment Act of 2016 provided for the establishment of a GST Council for consultation process.
• 279-A empowered the President to constitute a GST Council (joint forum of the Centre and the States). It is required to make recommendations to the Centre and the States on the following matters:

1. 1. The taxes, cesses and surcharges levied by the Centre, the States and the local bodies that would get merged in GST.
   2. The goods and services that may be subjected to GST or exempted from GST.
   3. Model GST Laws, principles of levy, apportionment of GST levied on supplies in the course of inter-state trade or commerce and the principles that govern the place of supply.
   4. The threshold limit of turnover below which goods and services may be exempted from GST.
   5. The rates including floor rates with bands of GST.
   6. Any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster.

FINANCE COMMISSION (ART. 280)

• 280 provides for a Finance Commission as a quasi-judicial body. It is constituted by the President every fifth year or even earlier.
• It is required to make recommendations to the President on the following matters:

1. 1. The distribution of the net proceeds of taxes to be shared between the Centre and the states, and the allocation between the states, the respective shares of such proceeds.
   2. The principles which should govern the grants-in-aid to the states by the Centre (i.e., out of the Consolidated Fund of India).
   3. The measures needed to augment the Consolidated fund of a state to supplement the resources of the panchayats and the municipalities in the state on the basis of the recommendations made by the State Finance Commission.
   4. Any other matter referred to it by the President in the interests of sound finance.

• The Constitution envisages the Finance Commission as the “balancing wheel of fiscal federalism in India”.

 

PROTECTION OF INTEREST OF THE STATES

• To protect the interest of states in the financial matters, the Constitution lays down that the following bills can be introduced in the Parliament only on the recommendation of the President:

1. 1. A bill which imposes or varies any tax or duty in which states are interested;
   2. A bill which varies the meaning of the expression “agricultural income” as defined for the purposes of the enactments relating to Indian income tax;
   3. A bill which affects the principles on which moneys are or may be distributable to states; and
   4. A bill which imposes any surcharge on any specified tax or duty for the purpose of the Centre.

 

BORROWINGS BY THE CENTRE AND STATE

NET PROCEEDS Net proceeds means the proceeds of a tax or a duty minus the cost of collection. The net proceeds of a tax or a duty in any area is to be ascertained and certified by the Comptroller and Auditor-General of India. His certificate is final.

• The Constitution makes the following provisions with regard to the borrowing powers of the Centre and the states:

1. 1. The Central government can borrow (within the limits fixed by the Parliament) either within India or outside upon the security of the Consolidated Fund of India or can give guarantees. However, no such law has been enacted by the Parliament till date.
   2. The state government can borrow within India only (and not abroad) (within the limits fixed by the legislature of that state) upon the security of the Consolidated Fund of the State or can give guarantees.
   3. The Central government can make loans to any state or give guarantees in respect of loans raised by any state. Any sums required for the purpose of making such loans are to be charged on the Consolidated Fund of India.
   4. A state cannot raise any loan without the consent of the Centre, if there is still outstanding any part of a loan made to the state by the Centre or in respect of which a guarantee has been given by the Centre.

INTER-GOVERNMENT TAX IMMUNITIES

1.Exemption of Union property from taxation of state (Art. 285)

• • Centre’s property is exempted from all taxes imposed by a state or any authority within a state like municipalities, district boards, panchayats and so on. But, the Parliament is empowered to remove this ban.
  • Property includes – lands, buildings, chattels, shares, debts, everything that has a money value, and movable or immovable and tangible or intangible.
  • The property may be used for sovereign (like armed forces) or commercial purposes.
  • The corporations or the companies created by the Central government are not immune (as they are separate legal entity) from state taxation or local taxation.

2.Exemption of State property from central taxation(Art. 289)

• • The property and income of a state is exempted from Central taxation. Such income may be derived from sovereign functions or commercial functions.
  • But the Centre can tax the commercial operations of a state if Parliament provides so.
  • However, the Parliament can declare any particular trade or business as incidental to the ordinary functions of the government and it would then not be taxable.
  • It should be noted that, the property and income of local authorities situated within a state are not exempted from the Central taxation.
  • Likewise, the property or income of corporations and companies owned by a state can be taxed by the Centre.
  • The Centre can impose customs duty on goods imported or exported by a state, or an excise duty on goods produced or manufactured by a state – advisory opinion of the Supreme Court, 1963.

 

EFFECTS OF EMERGENCIES

1.National emergency (Art.352)

• • The President can modify the constitutional distribution of revenues between the Centre and the states in operation of national emergency.
  • The president can either reduce or cancel the transfer of finances (both tax sharing and grants-in-aid) from the Centre to the states.
  • Such modification continues till the end of the financial year in which the emergency ceases to operate.

 

2. Financial emergency (Art.360)

• • In case of financial emergency, the Centre can give directions to the states: (i) to observe the specified canons of financial propriety; (ii) to reduce the salaries and allowances of all class of persons serving in the state; and (iii) to reserve all money bills and other financial bills for the consideration of the President.

 

FACTORS RESPONSIBLE FOR POOR STATE FINANCES

• Populist policies to win the elections
• Less elastic nature of state taxes
• Corruption in the tax administration state
• States have not tapped their fullest taxation potential – agriculture is out of taxation
• State level public sectors enterprises are more or less inefficient to accrue fiscal benefits
• Limited avenues of taxation available with the states
• In between 1986-1997, state governments accumulates high cost debts and recommendations of fifth pay commission came as final hammer on state finances
• Outbreak of COVID-19 pandemic drained financial resources of the states at unprecedented scale.

 

PUNCHHI COMMISSION ON CENTRE-STATE FINANCIAL RELATIONS

• All future central laws involving the state should provide for cost sharing as in RTE act.
• Do away with ceiling on profession tax under Art. 276
• Adopt a state specific approach towards fiscal consolidation as opposed uniform FRBM act.
• A part of state proceeds of spectrum should be shared with state for infrastructural projects.
• Synchronisation of an award of Union Finance Commission and State Finance Commission.
• Setting up Inter-State Commerce Commission under Art. 301.
• Existing central laws where the states are entrusted with implementation should be suitably modify to provide for cost sharing.

 

TRENDS IN CENTRE-STATE RELATIONS

• Till 1967, the centre–state relations by and large were smooth due to one- party rule at the Centre and in most of the states.
• In 1967 elections, the Congress party was defeated in nine states and its position at the Centre became weak. This changed political scenario heralded a new era in the Centre–state relations.
• The Non- Congress Governments in the states opposed the increasing centralisation and intervention of the Central government.
• They raised the issue of state autonomy and demanded more powers and financial resources to the states. This caused tensions and conflicts in Centre–state relations.

 

FRICTIONAL AREAS IN CENTRE-STATE RELATIONS

• Mode of appointment and dismissal of governor;
• Discriminatory and partisan role of governors;
• Imposition of President’s Rule for partisan interests;
• Deployment of Central forces in the states to maintain law and order;
• Reservation of state bills for the consideration of the President;
• Discrimination in financial allocations to the states;
• Role of Planning Commission in approving state projects;
• Management of All-India Services (IAS, IPS, and IFS);
• Use of electronic media for political purposes;
• Appointment of enquiry commissions against the chief ministers;
• Sharing of finances (between Centre and states);
• Encroachment by the Centre on the State List.

 

COMMITTEES ON CENTRE-STATE RELATIONS

a. Administrative Reforms Commission (ARC)

• The Central government appointed a six-member ARC in 1966 under the chairmanship of Morarji Desai
• In final report of 1969, it made 22 recommendations for improving the Centre-state relations. The important recommendations are:
  1. Establishment of an Inter-State Council under 263 of the Constitution.
  2. Appointment of persons having long experience in public life and administration and non-partisan attitude as governors.
  3. Delegation of powers to the maximum extent to the states.
  4. Transferring of more financial resources to the states to reduce their dependency upon the Centre.
  5. Deployment of Central armed forces in the states either on their request or otherwise.
  6. No action was taken by the Central government on the recommendations of the ARC.

b. Raja Mannar committee

• In 1969, the DMK govt. in Tamil Nadu appointed a three – member committee under the chairmanship of Dr. V. Rajamannar to examine the entire question of Centre-state relations.
• The committee submitted its report to the Tamil Nadu Government in 1971.
• The Committee identified the following reasons for the prevailing unitary (centralisation) trends:

1. 1. Certain provisions in the Constitution which confer special powers on the Centre;
   2. One-party rule both at the Centre and in the states;
   3. Inadequacy of states’ fiscal resources and consequent dependence on the Centre for financial assistance;
   4. The institution of Central planning and the role of the Planning Commission.

• The important recommendations of the committee are as follows:

1. 1. An Inter-State Council should be set up immediately;
   2. Finance Commission should be made a permanent body;
   3. Planning Commission should be disbanded and its place should be taken by a statutory body;
   4. 356, 357 and 365 (dealing with President’s Rule) should be totally omitted;
   5. The provision that the state ministry holds office during the pleasure of the governor should be omitted;
   6. Certain subjects of the Union List and the Concurrent List should be transferred to the State List;
   7. the residuary powers should be allocated to the states;
   8. All-India services should be abolished.

 

c. Anandpur Sahib resolution

• In 1973, the Akali Dal (Punjab) adopted a resolution containing both political and religious demands in a meeting held at Anandpur Sahib in Punjab.
• The resolution demanded that the Centre’s jurisdiction should be restricted only to defence, foreign affairs, communications, and currency
• The entire residuary powers should be vested in the states. It stated that the Constitution should be made federal in the real sense and should ensure equal authority and representation to all the states at the Centre.

 

d. West Bengal memorandum

• In 1977, the West Bengal Government (led by the Communists) published a memorandum on Centre-state relations and sent to the Central government.
• The memorandum, among others suggested the following recommendations:

1. 1. The word ‘union’ in the Constitution should be replaced by the word ‘federal’;
   2. The jurisdiction of the Centre should be confined to defence, foreign affairs, currency, communications and economic co-ordination;
   3. All other subjects including the residuary should be vested in the states;
   4. 356 and 357 and 360 should be repealed;
   5. State’s consent should be made obligatory for formation of new states or reorganisation of existing states;
   6. Of the total revenue raised by the Centre from all sources, 75 per cent should be allocated to the states;
   7. Rajya Sabha should have equal powers with that of the Lok Sabha;
   8. There should be only Central and state services and the all India services should be abolished.

• The Central government did not accept the demands made in the memorandum.

 

e. Sarkaria commission

• In 1983, the Central government appointed a three-member Commission on Centre– State relations under the chairmanship of S. Sarkaria.
• The commission was asked to examine and review the working of existing arrangements between the Centre and states in all spheres and recommend appropriate changes and measures.
• The Commission made 247 recommendations to improve Centre– state relations. The important recommendations are mentioned below:

1. 1. A permanent Inter-State Council called the should be set up under 263.
   2. 356 (President‘s Rule) should be used very sparingly, in extreme cases as a last resort when all the available alternatives fail.
   3. The institution of All-India Services should be further strengthened and some more such services should be created.
   4. The residuary powers of taxation should continue to remain with the Parliament, while the other residuary powers should be placed in the Concurrent List.
   5. When the president withholds his assent to the state bills, the reasons should be communicated to the state government.
   6. The zonal councils should be constituted afresh and reactivated to promote the spirit of federalism.
   7. The Centre should have powers to deploy its armed forces, even without the consent of states. However, it is desirable that the states should be consulted.
   8. The Centre should consult the states before making a law on a subject of the Concurrent List.
   9. The procedure of consulting the chief minister in the appointment of the state governor should be prescribed in the Constitution itself.
   10. The net proceeds of the corporation tax may be made permissibly shareable with the states.
   11. The governor cannot dismiss the council of ministers so long as it commands a majority in the assembly.
   12. The governor‘s term of five years in a state should not be disturbed except for some extremely compelling reasons.
   13. No commission of enquiry should be set up against a state minister unless a demand is made by the Parliament.
   14. The surcharge on income tax should not be levied by the Centre except for a specific purpose and for a strictly limited period.
   15. Steps should be taken to uniformly implement the three language formula in its true spirit.
   16. No change in the role of Rajya Sabha and Centre‘s power to reorganise the states.
   17. The commissioner for linguistic minorities should be activated.

• Till December 2011, the Central government has implemented 180 (out of 247) recommendations of the Sarkaria Commission.
• The most important is the establishment of the Inter-State Council in 1990.

 

f. Punchhi commission

• The Second commission on Centre-State Relations was set-up by the GoI in April 2007 under the Chairmanship of M. Punchhi. It submitted its report in April 2010
• In finalizing the report, the Commission took extensive help from the Sarkaria Commission report, the National Commission to Review the Working of the Constitution (NCRWC) report and the Second ARC
• The Planning Commission has a crucial role in the current situation. But its role should be that of coordination rather that of micro managing sectoral plans of the Central ministries and the states.
• Steps should be taken for the setting up of an Inter-State Trade and Commerce Commission under 307 read with Entry 42 of List-I.
• This Commission should be vested with both advisory and executive roles with decision making powers.
• As a Constitutional Body, the decisions of the Commission should be final and binding on all states as well as the Union of India.

Any party aggrieved with the decision of the Commission may prefer an appeal to the Supreme Court.