Below we reproduce the note submitted by Manik Sarkar, chief minister of Tripura to a meeting on federalism and centre-state relations organised in New Delhi on September 30, by the Delhi chief minister Arvind Kejriwal.

INDIA requires a more federal system to strengthen the democratic framework of the Indian State. The powers of the states in the legislative, administrative and financial spheres are limited even though they have a major responsibility to ensure development and fulfill the needs of the people. It is necessary to correct existing imbalances by thorough restructuring of centre – state relations. Having a federal system with equitable relations between the centre and the states has an important bearing on the functioning of our democracy as well as the well being of the people.

This note addresses some of the major issues concerning centre- state relations today.

LEGISLATIVE & ADMINISTRATIVE SPHERES

APPOINTMENT & 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. The governor cannot bypass the elected state government, or intervene arbitrarily in the functioning of the administration. 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.

MISUSE OF

ARTICLE 356 & 355

The repeated misuse by the centre of the provisions of Article 356 of the constitution to dismiss state government and dissolve state assemblies has been subverting the federal principle and the rights of the states. In view of the Supreme Court judgment in the SR Bommai case there is an urgent need to build in strong safeguards in Article 356 and 355 through appropriate amendments to the constitution. Article 356 should be restructured to cases where there is a serious threat to national unity or the secular fabric of the country.

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.

II

Fiscal federalism in India has always been deeply problematic, with vertical and horizontal imbalances not only persisting till date but also getting aggravated in many cases. Resources have always remained centralised in the hands of the union government with the states suffering from gross inadequacy of resources in relation to their development needs. The already limited financial and economic decision making powers of the states have got further constrained in the post– liberalisation period.

DEVOLUTION OF 50 PERCENT OF

CENTRAL TAXES TO STATES

It is essential to work out a fair principle for sharing of central taxes with the states. The central taxes net of transfer to the states and the state taxes including states share in central taxes should be in proportion to the development expenditures incurred by the centre and the states respectively. On the basis of this principle and the available data on the trend of existing as well as the required development expenditure of the states, it had been worked out that the states’ share of central tax revenue should be at least 50 percent.

The Fourteenth Finance Commission recommended devolution of 42 percent of the central taxes. This step was in the correct direction. However, the central government while implementing this recommendation, devolved 42 percent of the share of central taxes to the states but at the same time reduced budgeted central assistance to state plans and cut or stopped untied funds, the net result being the states were deprived of any extra resources. This approach goes against the interest of the states; thus development works suffer and ultimate sufferers are the people. Therefore, this negative approach needs to be changed.

SPECIAL CATEGORY

STATES

The special category states have suffered with the cut or stoppage of special central assistance and special plan assistance for 2015-16 which were extended overwhelmingly to special category states. There is no allocation for Normal Central Assistance and the Backward Regions Grant Fund. With the abolition of the Planning Commission, the allocations made to the special category states are in jeopardy. This is nothing but a big blow to the states which are underdeveloped. This cannot be accepted and the grants under Normal Central Assistance, Special Central Assistance and Special Plan Assistance need to be continued by the centre without fail.

PROBLEMS WITH CENTRALLY

SPONSORED SCHEMES

The proliferation of centrally sponsored schemes, whose design and implementation are totally determined by centre without adequate consultation with the state governments, is another serious problem. The excessively centralised and rigid formats of these schemes often make them ill suited for the specific needs of the states. Since the state governments have to bear a part of the expenditure behind such schemes in most cases, the states find it difficult to make proper allocation of their own resources keeping their own priorities in view. Moreover, conditionalities are often imposed through these schemes, which impinge upon the autonomy of the states.

All centrally sponsored schemes under the state subject, as well as those under panchayats and municipalities, should be transferred to the states with funds. Broad guidelines can be worked out on the basis of discussions between centre and the states and also an appropriately periodic joint centre-state review. However, the formulation and implementation of the schemes should be left to the states along with transfer of funds. 

III

INSTITUTIONAL ARRANGEMENTS

The institutional bodies through which the issues related to centre-state relations are supposed to be discusses and resolved are the Inter- State Council, National   Integration Council, National Development Council, Finance Commission and the Boards of the Reserve Bank of India and other financial institutions. However, the past record shows that neither have these bodies worked with effective representation of the states, nor have their decisions succeeded in providing a fair deal to the states. In fact, these bodies have functioned ceremonially and almost as an extension of the union government, with an implied bias in favour of concentrating power at the centre. These need to be changed and these institutional arrangements developed into vibrant bodies with appropriate statutory backing.

INTER-STATE

COUNCIL

The constitution should be amended to make the decisions of the Inter-State Council binding on the union government. All major issues involving centre-state relations have to be discussed and decided by the Inter-State Council. The Inter-State Council should mandatorily meet twice a year.

NDC AND PLANNING

COMMISSION

The National Development Council should be granted constitutional status. The Planning Commission should be revived in a modified form and should act as an executive wing of the NDC. The Planning Commission should allocate adequate funds for state-level projects having national implications and ensure inter-state balance in central investments in CPSUs, railways, national highways, ports, airports etc. The PDS allocations should be in accordance with the needs of the states and not decided unilaterally by the centre.

FINANCE

COMMISSION

In determining the terms of reference of the Finance Commission, the views of the states should be taken into account. Any difference of views on the terms of reference should be settled in the Inter-State Council. There should be proper representation of the states in the Finance Commission.