Centre State Relations

Centre State Relations

The Constitution of India provides a dual polity with a clear division of powers between the Union and the States, each being supreme within the sphere allotted to it. The Indian federation is not the result of an agreement between independent units, and the units of Indian federation cannot leave the federation.

Thus the constitution contains elaborate provisions to regulate the various dimensions of the relations between the centre and the states.

The relations between centre and state are divides as:

• Legislative relations

• Administrative relations 

• Financial relations

a) LEGISLATIVE RELATIONS

Articles 245 to 255 in Part XI of the Constitution deal with the legislative relations between the Centre and the State.

• Extent of laws made by Parliament and by the Legislatures of States

The Parliament can make laws for the whole or any part of the territory of India. Territory of India includes the states, UTs and any other area for the time being included in the territory of India. Whereas, the state legislature can make laws for whole or any part of state.

The Parliament can alone make ‘extra territorial legislation’ thus the laws of the Parliament are applicable to the Indian citizens and their property in any part of the world.

• Subject-matter of laws made by Parliament and by the Legislation of States

The Constitution divides legislative authority between the Union and the States in three lists- the Union List, the State List and the Concurrent List. The Union list consists of 99 items. The Union Parliament has exclusive authority to frame laws on subjects enumerated in the list. These include foreign affairs, defence, armed forces, communications, posts and telegraph, foreign trade etc.

The State list consists of 61 subjects on which ordinarily the States alone can make laws. These include public order, police, administration of justice, prison, local governments, agriculture etc.

The Concurrent list comprises of 52 items including criminal and civil procedure, marriage and divorce, economic and special planning trade unions, electricity, newspapers, books, education, population control and family planning etc. Both the Parliament and the State legislatures can make laws on subjects given in the Concurrent list, but the Centre has a prior and supreme claim to legislate on current subjects. In case of conflict between the law of the State and Union law on a subject in the Concurrent list, the law of the Parliament prevails.

• Residuary powers of legislation

The constitution also vests the residuary powers (subjects not enumerated in any of the three Lists) with the Union Parliament. The residuary powers have been granted to the Union contrary to the convention in other federations of the world, where the residuary powers are given to the States. However, in case of any conflict, whether a particular matter falls under the residuary power or not is to be decided by the court.

• Parliament’s Power to Legislate on State List

Though under ordinary circumstances the Central Government does not possess power to legislate on subjects enumerated in the State List, but under certain special conditions the Union Parliament can make laws even on these subjects.

a) In the National Interest (Art.249)

If the Rajya Sabha declares by a resolution supported by not less than 2/3 of its members present and voting, that it is necessary or expedient in the national interest that the Parliament should make laws with respect to any matter enumerated in the State List (Art.249). After such a resolution is passed, Parliament can make laws for the whole or any part of the territory of India. Such a resolution remains in force for a period of 1 year and can be further extended by one year by means of a subsequent resolution.

b) Under Proclamation of National Emergency (Art.250)

Parliament can legislate on the subjects mentioned in the State List when the Proclamation of National Emergency is in operation. However, the laws made by the Parliament under this provision shall cease to have effect on the expiration of a period of six months after the Proclamation has ceased to operate, except as respects things done or omitted to be done before the expiry of the said period.

c) By Agreement between States (Art. 252)

The Parliament can also legislate on a State subject if the legislatures of two or more states resolve that it is lawful of Parliament to make laws with respect to any matter enumerated in the State List relating to those State.  Thereafter, any act passed by the Parliament shall apply to such states and to any other state which passes such a resolution. The Parliament also reserves the right to amend or repeal any such act.

d) To Implement Treaties (Art. 253)

The Parliament can make law for the whole or any part of the territory of India for implementing any treaty, international agreement or convention with any other country or countries or any decision made at any international conference, association or other body. Any law passed by the Parliament for this purpose cannot be invalidated on the ground that it relates to the subject mentioned in the State list.

e) Under Proclamation of President’s Rule (Art.356)

The President can also authorize the Parliament to exercise the powers of the State legislature during the Proclamation of President’s Rule due to breakdown of constitutional machinery in a state. But all such laws passed by the Parliament cease to operate six months after the Proclamation of President’s Rule comes to an end.

• Centre’s control over State Legislation

The Constitution empowers the centre to exercise control over the state’s legislature in following ways:

a) 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 them.
b) Bills on certain matters enumerated in the State List can be introduced in the state legislature only with the previous sanction of the President as imposing restrictions on freedom of trade and commerce.
c) The President can direct the states to reserve money bills and other financial bills passed by the state legislature for his consideration during a financial emergency.

Administrative Relations

The administrative jurisdiction of the Union and the State Governments extends to the subjects in the Union list and State list respectively. The Constitution thus defines the clauses that deal with the administrative relations between Centre and States.

• DURING NORMAL TIMES

1. Executive Powers of State be exercised in compliance with Union Laws: Article 256 lays down that the executive power of every State shall be so exercised as to ensure compliance with the laws made by Parliament and any existing laws which apply in that State, and the executive power of the Union shall extend to the giving of such directions to a state as may appear to the Government of India to be necessary for that purpose.

2. Executive Powers of State not to interfere with Executive Power of Union: Article 257 of the Constitution provides that the executive power of every state shall be so exercised as not to impede or prejudice the exercise of the executive power of the Union, and the executive power of the Union shall extend to giving of such directions to a state as may appear to the Government of India to be necessary for that purpose.  In short, the Union Government can issue directions to the state Government even with regard to the subjects enumerated in the state list.

3. Maintain means of communication of National or Military importance: The Union Government can give directions to the state with regard to construction and maintenance of the means of communication declared to be of national or military importance.

4. Protection of the Railways: Union can issue State Governments necessary directions regarding the measures to be taken for the protection of the railways within the jurisdiction of the State.  It may be noted that the expenses incurred by the State Governments for the discharge of these functions have to be reimbursed by the Union Government.

5. To ensure welfare of Scheduled Tribes in the States: Union can direct the State Governments to ensure execution of schemes essential for the welfare of the Scheduled Tribes in the States.

6. To secure instruction in the mother-tongue at the primary stage of education: Union can direct the State Governments to secure the provision of adequate facilities for instruction in the mother-tongue at the primary stage of education to children belonging to linguistic minority groups.

7. To ensure development of the Hindi language: Union can direct the State Governments to ensure the development of the Hindi language.

8. To ensure government of a State is carried on in accordance with the provision of the Constitution: Union can direct the State Governments to ensure that the government of a State is carried on in accordance with the provision of the Constitution. If any State failed to comply with any directions given by the Union in exercise of its executive power, then President may 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. Thus he may proclaim President’s Rule in that State.

9. Delegation of Union’s function to State: The President of India can entrust to the officers of the State certain functions of the Union Government.  However, before doing so the President has to take the consent of the state Government.  But the Parliament can enact law authorizing the Central Government to delegate its function to the State Governments or its officers irrespective of the consent of such State Government. On the other hand, a State may confer administrative functions upon the Union, with the consent of the Union only.

10. Appointment of High Dignitaries: Union has major say in appointment and removal of Governor and appointment of Judges of High Court and Members of State Public Service Commission.

11. All India Services: The presence of the All India Services - the Indian Administrative Services, Indian police Services - further accords a predominant position to the Union Government.  The members of these services are recruited and appointment by the Union Public Service Commission.  The members of these services are posted on key posts in the states, but remain loyal to the Union Government.

12. Union to adjudicate Inter-State River Water Dispute: The Parliament has been vested with power to adjudicate any dispute or complaint with respect to the use, distribution or control of the waters of, or in any inter-state river or river-valley. In this regard, the Parliament also reserves the right to exclude such disputes from the jurisdiction of the Supreme Court or other Courts.

DURING EMERGENCIES

1. Under President’s Rule: The State Governments cannot ignore the directions of the Union Government, otherwise the President can take the action against the Government of the State stating that the administration cannot be carried on the accordance with the provisions of the Constitution and thus can impose President's rule on the State.  In such an eventuality the President shall assume to himself all or any of the functions of the state Government.

2. Under Proclamation of National Emergency: During a Proclamation of National Emergency, the power of the Union to give directions extends to the giving of directions as to the manner in with the executive power of the State is to be exercised relating to any matter.

3. Under Proclamation of Financial Emergency: During a Proclamation of Financial Emergency, Union can direct the State Governments to observe certain canons of financial propriety and to reduce the salaries and allowances of all or any class of person serving in connection with the affairs of the Union including the Judges of the Supreme Court and High Courts. Union also requires all Money Bills or Financial Bills to be reserved for the consideration of the President after they are passed by the Legislature of the State.

It is thus, evident that in the administrative sphere the States cannot act in complete isolation and have to work under the directions and in cooperation with the Center.

FINANCIAL RELATIONS

Indian Constitution has made elaborate provisions, relating to the distribution of the taxes as well as non-tax revenues and the power of borrowing, supplemented by provisions for grants-in-aid by the Union to the States.

Article 268 to 293 deals with the provisions of financial relations between Centre and States.

• The Constitution divides the taxing powers between the Centre and the states as follows:

The Parliament has exclusive power to levy taxes on subjects enumerated in the Union List, the state legislature has exclusive power to levy taxes on subjects enumerated in the State List, both can levy taxes on the subjects enumerated in Concurrent List whereas residuary power of taxation lies with Parliament only.

• The distribution of the tax-revenue between the Union and the States stands as follows:

a) Duties Levied by the Union but Collected and Appropriated by the States: Stamp duties on bills of Exchange, etc., and Excise duties on medical and toilet preparations containing alcohol. These taxes don’t form the part of the Consolidated Fund of India, but are assigned to that state only.

b) Service Tax are Levied by the Centre but Collected and Appropriated by the Centre and the States.

c) Taxes Levied as Well as Collected by the Union, but Assigned to the States: These include taxes on the sale and purchase of goods in the course of inter-state trade or commerce or the taxes on the consignment of goods in the course of inter-state trade or commerce.

d) Taxes Levied and Collected by the Union and Distributed between Union and the States: Certain taxes shall be levied as well as collected by the Union, but their proceeds shall be divided between the Union and the States in a certain proportion, in order to effect on equitable division of the financial resources. This category includes all taxes referred in Union List except the duties and taxes referred to in Article 268, 268-A and 269; surcharge on taxes and duties mentioned in Article 271 or any Cess levied for specific purposes.

e) Surcharge on certain duties and taxes for purposes of the Union: Parliament may at any time increase any of the duties or taxes referred in those articles by a surcharge for purposes of the Union and the whole proceeds of any such surcharge shall form part the Consolidated Fund of India.

• Grants-in-Aid

Besides sharing of taxes between the Center and the States, the Constitution provides for Grants-in-aid to the States from the Central resources. There are two types of grants:-

1. Statutory Grants

2. Discretionary Grants

1. Statutory Grants: These grants are given by the Parliament out of the Consolidated Fund of India to such States which are in need of assistance. Different States may be granted different sums. Specific grants are also given to promote the welfare of scheduled tribes in a state or to raise the level of administration of the Scheduled areas therein (Art.275).

2. Discretionary Grants: Center provides certain grants to the states on the recommendations of the Planning Commission which are at the discretion of the Union Government. These are given to help the state financially to fulfill plan targets (Art.282).

• Effects of Emergency on Center-State Financial Relations:-

1. During National Emergency: The President by order can direct that all provisions regarding division of taxes between Union and States and grants-in-aids remain suspended. However, such suspension shall not go beyond the expiration of the financial year in which the Proclamation ceases to operate.

2. During Financial Emergency: Union can give directions to the States:-

a) To observe such canons of financial propriety as specified in the direction.

b) To reduce the salaries and allowances of all people serving in connection with the affairs of the State, including High Courts judges.

c) To reserve for the consideration of the President all money and financial Bills, after they are passed by the Legislature of the State.

• Finance Commission

Although the Constitution has made an effort to allocate every possible source of revenue either to the Union or the States, but this allocation is quite broad based.  For the purpose of allocation of certain sources of revenue, between the Union and the State Governments, the Constitution provides for the establishment of a Finance Commission under Article 280.  According to the Constitution, the President of India is authorized to set up a Finance Commission every five years to make recommendation regarding distribution of financial resources between the Union and the States.

Constitution

Finance Commission is to be constituted by the President every 5 years. The Chairman must be a person having ‘experience in public affairs’. Other four members must be appointed from amongst the following:-

1. A High Court Judge or one qualified to be appointed as High Court Judge;

2. A person having knowledge of the finances and accounts of the Government;

3. A person having work experience in financial matters and administration;

4. A person having special knowledge of economics.

Functions

The Finance Commission recommends to the President as to:-

1. the distribution between the Union and the States of the net proceeds of taxes to be divided between them and the allocation between the States of  respective shares of such proceeds;

2. the principles which should govern the grants-in-aid of the revenue of the States 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 Municipalities in the State;

4. Any other matter referred to the Commission by the President in the interest of sound finance.