Cooperative Federalism: Ensuring a Fair Federal Balance

Context: In the background of the recent judgement of the Supreme Court in the State of Tamil Nadu vs the Governor of Tamil Nadu, the state government of Tamil Nadu has created a high-level Committee to strengthen State autonomy. Let us discuss the nature of federalism in India and issues pertaining to federal structure.

Relevance of the Topic: Mains: Cooperative Federalism: Significance and Challenges. 

Federalism in India: Federal System with Unitary Bias

• The Indian Constitution establishes a federal system of Government. Features of federation include: two governments, division of powers, written Constitution, supremacy of Constitution, rigidity of Constitution, independent judiciary and bicameralism. 
• The Constitution also contains a large number of unitary or non-federal features, viz., a strong Centre, single Constitution, single citizenship, flexibility of Constitution, integrated judiciary, appointment of state governor by the Centre, all-India services, emergency provisions and so on. 
• Moreover, the term ‘Federation’ has nowhere been used in the Constitution. Article 1 describes India as a ‘Union of States’ which implies two things:
  • The Indian Federation is not the result of an agreement by the states.
  • No state has the right to secede from the federation.  
• Hence, the Indian Constitution has been variously described as ‘federal in form but, unitary in spirit’, ‘quasi-federal’ by K.C. Wheare, ‘bargaining federalism’ by Morris Jones, ‘co-operative federalism’ by Granville Austin, ‘federation with a centralising tendency’ by Ivor Jennings. 

Issues in Cooperative Federalism:

There are frequent conflicts between the Centre and the states in India, because: 

1. Over-Centralisation: 

• India is quasi-federal with most of the powers in the hands of the union government. The Centre enjoys more power than the states, and the most important subjects of the country are listed in the Union List.
• Issues with Concurrent list: Sometimes concurrent lists are misinterpreted by Centre to make laws on state subjects. E.g., Entry 33 of Concurrent list for instance, deals with "trade and commerce in, and the export of, inter-State and foreign trade." This ambiguity allows the centre to potentially justify legislation that impacts agricultural markets, traditionally a state subject. Also, Central laws on concurrent subjects are rigid leaving little flexibility for states. E.g., Labour code.
• Centre ventures into State list: To make pan-India legislations, sometimes, Centre encroaches upon state list. E.g., The Motor Vehicles Amendment Act, 2019, aimed at standardising traffic rules across India, even though road transport and law & order falls under the State List.
• Residuary power with Parliament: Gives huge scope to frame laws on any subject not mentioned in three lists, potentially infringing on state subjects and results in friction.
• Article 356 (related to the imposition of the President’s Rule in a state) is frequently prone to misuse by the Centre.

2. Partisan Role of the Governor: 

• Appointment Process: Governors are appointed by the President, who is generally from the ruling party at the centre. This can lead to governors being seen as representatives of the central government rather than impartial figures.
• Centre’s control over State Legislation: Reservation of certain types of bills for President’s consideration, who enjoys absolute veto over them. Reservation of bills by the governor has also emerged as a friction point in states like Punjab, TN and Kerala.
• Allegations exist of governors recommending dissolution of state assemblies to benefit any particular party or governors might invite a specific party to form the government after an election, even if it does not have a clear majority, potentially based on their political affiliation with the centre.

3. Sharing of Finances (between Centre and states): 

• Loss of taxation rights under GST mechanism: With the advent of GST, the states lost their rights to increase tax revenues by changing the tax rates on sale of many goods and services.  (GST rates and slabs are decided by the GST council with 3/4^th majority vote).
• Shrinking devolution: Over the last few years, the central government has reduced the tax rates and increased the cess and surcharges which are not mandated to be shared with the states. Cess and surcharges are part of central taxes but not part of the divisible tax pool and do not have to be shared with States.
• Ceiling on the states’ borrowing: Union Budget has kept 3.5% of GSDP as their borrowing limit for FY24 and it restricted borrowing power of the states. 

4. Other Issues of Contention: 

• Deployment of Central forces in the states to maintain law and order.
• Management of All-India Services (IAS, IPS, and IFS).
• Appointment of enquiry commissions against the chief ministers. 
• Inter-state River dispute 

Way Forward: Measures for smooth Centre-state legislative relations

• Strengthening of the Inter-state council under Article 263 by giving it real power and authority. Making ISC a permanent body following the recommendations of Sarkaria Commission.
• Adequate funds transfer to states from the divisible pool of taxes. 
• Prior consultation with state governments before Centre makes legislation on concurrent subjects. Reasons to be communicated to the state when the President vetoes state bills.
• Enhancing the role of institutions such as the NITI Aayog, the Inter-State Council, and the Finance Commission. 
• The Office of Governor should be apolitical, and the terms of his removal should be altered.
• Parliament should be more considerate in exercising its powers over subjects in state and concurrent lists, to preserve the essence of federalism. 
• Avoiding the ‘One size fits all’ approach to promote cooperative federalism and recognising the diversity of the States in terms of their socio-economic, political, and cultural contexts.

The principle of ‘Self-rule in the States; collective rule at the Union’ can be encouraged to bring in more autonomy for the States.