Federalism

Issue of Restoration of Statehood to Jammu and Kashmir

Context: The Supreme Court has recently sought a detailed response from the Centre on the issue of restoration of statehood to Jammu and Kashmir.

Relevance of the topic:

Prelims: Concept of Federalism, Constitutional Framework for Creation of States.

Mains: Issue of Restoration of Statehood to Jammu and Kashmir. 

Abrogation of Article 370 

  • The abrogation of Article 370 and enactment of the Jammu and Kashmir Reorganisation Act, 2019 bifurcated the State into two Union Territories:
    • Jammu & Kashmir (with legislative assembly)
    • Ladakh (without legislative assembly). 
  • The Supreme Court in 2023 upheld the abrogation, but it also directed the Union Government to restore statehood and conduct Assembly elections. 
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Constitutional Framework for Creation of States

The Constitution of India provides three processes for creating States: admission, establishment, and formation.

  • Admission requires an organised political unit and is guided by international law, as was the case with Jammu and Kashmir’s accession in 1947 through the Instrument of Accession signed by Maharaja Hari Singh.
  • Establishment involves acquisition of new territories, such as the cases of Goa and Sikkim.
  • Formation refers to reorganisation of existing States under Article 3, which has expanded India’s map from 14 States in 1956 to 29 States before the Jammu and Kashmir Reorganisation Act, 2019.

Article 3 empowers Parliament to form, alter, or rename States, but it does not authorise converting a State into a Union Territory on a permanent basis. Thus, continuing to keep Jammu and Kashmir as a Union Territory is against the spirit of federalism embedded in the Constitution.

Implications of Non-Restoration:

  • Denial of statehood leads to a democratic deficit, since a Union Territory places overriding powers in the hands of the Lieutenant Governor rather than the elected government.
  • It also dilutes citizens’ rights to self-governance, which is central to India’s democratic framework.
  • Continued Union control risks alienating the people of Jammu and Kashmir and may undermine long-term stability and integration.
  • From a constitutional perspective, it sets a dangerous precedent where any State could potentially be downgraded to a Union Territory, eroding the spirit of federalism.

Why Restoration of Statehood is Imperative?

  • Restoring statehood is imperative to uphold federalism, which the Supreme Court in Kesavananda Bharati (1973) held to be part of the Basic Structure. 
  • The Rajya Sabha under Article 83(1) ensures continuous representation of States in national decision-making , and denial of statehood disrupts this equilibrium and weakens India’s cooperative federalism.
  • It empowers the elected government and restores the principle of self-rule, thereby addressing the democratic aspirations of the people.
  • It reinforces the separation of powers by complying with the Supreme Court’s directions.
  • It helps maintain national unity with federal balance, preventing over-centralisation that could erode trust among States.

While temporary Union control may be justified on grounds of security, its prolonged continuation undermines both the letter and spirit of the Constitution. The restoration of statehood to Jammu and Kashmir is not merely a political demand but a constitutional obligation essential for safeguarding India’s federal design.

Governor Can Act Independently: A-G

Context: The Attorney-General of India submitted before a five-judge Bench headed by the Chief Justice of India that a Governor’s power to withhold assent to a proposed State legislation is an act independent of the Council of Ministers.

Relevance of the Topic:Prelims: Constitutional Provisions on Governor’s Role. Mains: Governor: Powers, challenges & way forward. 

Constitutional Provisions on Governor’s Role

  • Article 163: Council of Ministers to aid and advise the Governor.
    • Article 163 (1): There shall be a Council of Ministers led by the Chief Minister to aid and advise the Governor in the exercise of his functions, except in matters where the Constitution allows him to act on his own discretion.
    • Article 163 (2): If any question arises with respect to whether a matter falls under Governors' discretionary power or not, the governor’s decision will be final. The validity of anything done by the governor in his discretion will not be called into question.
    • Article 163 (3): The advice given by the Ministers to the Governor shall not be inquired into any court.
  • Article 200: When a bill is sent to the governor after it is passed by state legislature, he can:
    • Give the assent to the bill
    • Withhold the assent to the bill
    • Return the bill (if not a money bill) for reconsideration of the state legislature. However, if the bill is passed again by the state legislature with or without amendments, the governor has to give assent to the bill
    • Reserve the bill for the consideration of the President.

The controversy lies in withholding the assent to the bill- whether it is a discretionary power or subject to ministerial advice. 

Governor Can Act Independently: A-G 

  • The Attorney-General of India submitted before a five-judge Bench headed by the Chief Justice of India that a Governor’s power to withhold assent to a proposed State legislation is an act independent of the Council of Ministers.
  • The Governor cannot be expected to be bound by the advice of the House if the proposed State law was found to be unconstitutional. In such cases, the Governor can act outside the aid and advice of the Council, and even contrary to the mandate of the House/Council of Ministers. 
  • A power to withhold necessarily involves personal independent judgment, guided by settled principles of laws. The 42nd Constitutional Amendment made Article 74 (1) explicit that the President shall act in accordance with the Cabinet advice. But Article 163 (Governors) was not amended to match Article 74. 

Relevant Court Cases: 

  • Shamsher Singh v. State of Punjab (1974): The Supreme Court clarified that the Governor must act on the aid and advice of the Council of Ministers, except in situations where the Constitution explicitly allows the Governor to act in his discretion. 
  • State of Rajasthan v. Union of India (1977): This case dealt with the role of the Governor under Article 356, which is related to President’s Rule. While discussing Article 163, the Supreme Court emphasised that the Governor's discretion is limited and he must act on the advice of the Council of Ministers, except in specific situations provided by the Constitution.
  • S. R. Bommai v. Union of India (1994): Primarily a case on Article 356, it also discussed the role of the Governor under Article 163. The Supreme Court held that the Governor's report to the President under Article 356 must be based on objective material, and the Governor’s actions are subject to judicial review.
  • M. P. Special Police Establishment v. State of Madhya Pradesh (2004): This case dealt with the Governor’s discretion in granting sanction for prosecution. The Supreme Court ruled that in certain circumstances, the Governor may act independently of the Council of Ministers, especially where the ministers themselves are under investigation. 

Issues and Concerns: 

  • Undefined scope of discretionary powers: The Constitution does not clearly define the scope of discretionary powers with the governor, thus leaving the scope for misuse. 
  • Erosion of Federalism: Frequent withholding or reserving of bills can delay state legislations and undermine elected government.   

Hence, this may lead to the situations when governors may have political bias and can act as the agent of the Union government. 

Way Forward

  • Sarkaria Commission (1988): Governor should be a detached figure and not too intimately connected with the local politics of the State. Discretion should be used sparingly; reserve bills only when required by the Constitution (as a last resort).
  • Punchhi Commission (2007): Article 163 does not give the Governor a general discretionary power to act against the advice of the Council of Ministers. The exercise of discretion is limited, and it must be dictated by reason, activated by good faith, and tempered by caution.
  • Nabam Rebia and Bamang Felix vs Deputy Speaker (2016): The Governor cannot withhold assent to a Bill indefinitely, but must return it to the Assembly with a message, and this could include his recommendation for amendments to the Bill.
  • State of Punjab vs Principal Secretary to Governor of Punjab (2023): Governor can not veto the legislature by indefinitely withholding assent to the bill. In case the bill is re-enacted, the governor does not exercise discretion to withhold the re-enacted bill.
  • SC’s Judgment in Tamil Nadu Governor case (2025): SC has prescribed a time limit for the Governor to exercise his powers under Article 200. The court said that a governor must be a friend, guide and philosopher to the State, not a hindrance.
    • The governor has a maximum of one month to withhold the assent based on the aid and advice of the State Cabinet. 
    • The governor has a maximum period of three months to return the bill by specifying reasons, if the bill is withheld contrary to the advice of the Cabinet. 
    • The governor has a maximum period of three months to reserve the bill for the President's consideration against the advice of the Cabinet. 
    • The governor must grant assent to the bill re-passed by the state legislature under Article 200 within a maximum period of one month. 

Hence, there is a need to align the Governor’s role with cooperative federalism, as envisioned by the Constitution.

Also Read: The Governor 

Who decides nominations to UT Assemblies?

Context: The Union Home Ministry, in an affidavit before the J&K and Ladakh High Court, submitted that the Lieutenant Governor (LG) of Jammu & Kashmir can nominate five members to the Legislative Assembly of J&K without the aid and advice of the elected Council of Ministers. 

This has revived debates on the constitutional scheme governing nomination of legislators and the principles of democratic accountability in Union Territories (UTs).

Relevance of the topic:

Prelims: Constitutional provisions for nominated members in Parliament, State legislatures, and UT Assemblies.

Mains: Federal balance between Centre and UTs, Role of LG vs elected government in UTs.

Constitutional and Statutory Provisions on Nominated Members

Indian Constitution provides for nominated members in the houses of Parliament and State legislature. 

  • Lok Sabha and State Legislative Assemblies: The provision for nominating two Anglo-Indian members to the Lok Sabha and one Anglo-Indian member to State Legislative Assemblies was discontinued in 2020 (104th Constitutional Amendment, 2020).
  • Rajya Sabha (Article 80): Rajya Sabha has 12 nominated members. These members are nominated by the President on the aid and advice of the Union Council of Ministers. 
  • States With Legislative Councils (Article 171): In the six States with Legislative Councils, nearly one-sixth of the members are nominated. These members are nominated by the Governors on the advice of the States’ Council of Ministers. 
  • Union Territories: The composition of the Legislative Assemblies of three Union Territories (UT) are governed by Acts of Parliament. 

Provisions on Nominated Members in Union Territories

  • Delhi: The Government of National Capital Territory of Delhi Act 1991 provides for 70 elected members in the Delhi Assembly. There are no nominated MLAs in the Delhi Assembly.
  • Puducherry: The Government of Union Territories Act 1963 provides for 30 elected members in the Legislative Assembly of Puducherry. It also provides that the Union government may nominate up to three members to the Puducherry Assembly. 
  • Jammu & Kashmir:
    • Section 14 of the J&K Reorganisation Act, 2019 (as amended in 2023) provides for a total of 90 elected seats in the Legislative Assembly of J&K.
    • In addition, Sections 15, 15A and 15B provide that the LG may nominate a total of up to five members (two women, two Kashmiri migrants and one displaced person from Pakistan occupied Kashmir) to the J&K Assembly.

What have the Courts ruled? 

K. Lakshminarayanan vs Union of India (2018) case: 

  • The Madras High Court upheld the power of the Union government to nominate three members to the Assembly and such nomination need not be based on the advice of the UT’s Council of Ministers.
  • However, the court also recommended that Parliament should bring statutory amendments to lay down a clear and unambiguous procedure for nomination of MLAs, including who will exercise this power and on what basis.
  • However, the Supreme Court on appeal had set aside the recommendations in this judgment of the Madras High Court. 

Government of NCT of Delhi versus Union of India (2023) case: 

  • The Supreme Court had delved into the concept of ‘triple chain of command’ that ensures democratic accountability.
  • In this ‘triple chain of command’ opined by the court, civil servants are accountable to ministers; ministers are accountable to the legislature; and the legislature is accountable to the electorate.
  • Therefore, it is held that the LG is bound by the aid and advice of the Council of Ministers in all matters, except where the Delhi Assembly does not have legislative powers.
  • Although this case dealt with appointment of officers in the Delhi Government, its reasoning may apply to the nomination of MLAs as well.

Way Forward

A UT does not enjoy the same status of a full-fledged State in the Indian federal set up. However, UTs with Assemblies have their own elected governments that are accountable to its population, therefore 

  • Political differences between the Union government and a UT government should not derail the democratic process in the UTs. 
  • The process of nomination must be based on the advice of the elected Council of Ministers as in smaller assemblies like that of J&K and Puducherry, these nominated MLAs can have the potential of converting a majority government into a minority one and vice versa, thereby rupturing popular mandates. 
  • J&K is a special case as it was a State till 2019 with greater autonomy than others. Though its conversion into a UT has been upheld by the Supreme Court, the Union Government has promised early restoration of statehood. Hence, the LG should nominate five members to the J&K Assembly on the advice of the Council of Ministers to uphold democratic principles.

Six years after Abrogation of Article 370 in J&K 

Context: August 5, 2025 marks the sixth anniversary of the abrogation of Article 370 in 2019, which revoked the special status of Jammu & Kashmir, and led to the effective repeal of Article 35A of the Indian Constitution.

 As J&K completes six years as a Union Territory, there have been both positive and negative developments after the abrogation of Article 370. 

Relevance of the Topic:Prelims: Key facts about Article 370; Article 35A. Mains: J&K after Article 370 abrogation: Key developments; Challenges. 

On August 5, 2019, the government revoked Article 370 through a Presidential order and reorganised the state. J&K was split into two Union Territories (UTs): J&K (with legislature) and Ladakh (without legislature), effective from October 31, 2019.

What was Article 370? 

  • Enacted in 1952, Article 370 granted erstwhile state J&K a unique degree of autonomy. The provision:
    • Allowed the state to operate with its own constitution and flag
    • The state retained the authority to make laws on all matters, except defence, foreign affairs, communications, and finance. 
  • Article 370 was placed under Part XXI of the Constitution, which deals with temporary and special provisions. It also allowed the state’s Constituent Assembly to decide how much of the Indian Constitution would apply. Notably, it included a clause permitting the Assembly to recommend the article’s own repeal.
  • In practice, Indian laws could not be applied to J&K without the consent of its state government. Indian Parliament’s legislative reach was therefore significantly limited, requiring state concurrence for most matters.

What was Article 35A?

  • Article 35A, added to the Constitution in 1954, gave special rights and privileges to the permanent residents of Jammu and Kashmir. 
  • Its roots lay in the 1952 Delhi Agreement between then-Prime Minister Jawaharlal Nehru and Jammu and Kashmir’s leader Sheikh Abdullah.
  • It empowered the Jammu and Kashmir state legislature to decide who qualified as a 'permanent resident' of the state. A permanent resident was someone who was a state subject as of May 14, 1954, or had lived in the state for at least 10 years and lawfully acquired property. These exclusive rights included:
    • It allowed the state to grant special rights to permanent residents in areas like land ownership, government jobs, and education scholarships.
    • It barred non-residents from permanently settling, buying property, or accessing state benefits.
    • It had a discriminatory clause against women: if a female resident married someone from outside the state, she could lose her property rights, and the same applied to her children.
  • The laws made under Article 35A were shielded from judicial scrutiny. No act of the state legislature coming under the ambit of Article 35A can be challenged for violating the Indian Constitution or any other law of the land. 

What has changed in J&K after Article 370 Abrogation?

Positive Developments: 

  • Successful elections and participation of voters: For the first time in decades, UT J&K recorded an impressive over 63% voter turnout in the Assembly elections. Additionally, the 2024 Lok Sabha elections witnessed the highest voter participation in the region in the last 35 years.
  • Major dip in violence and stone pelting: The incidents of stone pelting have completely stopped in the UT (As per the Union Home Ministry data). E.g., In 2023, not a single case of stone pelting or strike was recorded, a significant decline compared to 2010 (over 2600 incidents of stone pelting and 132 strikes).
  • Infrastructural development and investment: Successful completion of several infrastructural projects.
    • Inauguration of Rs 42,500 crore Udhampur-Srinagar-Baramulla Rail Link. It features the world’s highest rail bridge over the Chenab River. This bridge connects the Jammu region with Kashmir valley, and is crucial for regional integration, economic growth and defence mobility.
    • Projects worth over Rs 76000 crore are currently in the pipeline in the UT. Centre approved 19 road and tunnel projects worth over Rs 10,000 crores in June 2025.
  • Tourism boost: Post Article 370 abrogation, the UT has witnessed a major boost to tourism and local economy. E.g., Over 21.1 million people visited the UT in 2023. However, the recent Pahalgam attack has caused a brief hiatus. 

Pertaining Issues: 

  • Security Concerns and Terrorism in J&K: 
    • Selective killings: Targeting tourists, non-local employees & entrepreneurs (those being issued domicile certificates) for derailing measures to promote industrial development and tourism. E.g., Recent targeted attacks in Pahalgam. 
    • Improvised weapons: Reliance on IEDs to avoid confrontation with security forces, using sticky bombs (detonated from distance) & simulated training conditions.
    • New modes of weapon delivery: Air-dropping of bombs using UAVs by Pakistan-backed terror outfits. 
  • Economic Slowdown of J&K’s economy as a centrally administered unit:
    • Decline in GSDP: The growth in Gross State Domestic Product (GSDP) has declined both in nominal and in real terms. As a result, the contribution of J&K to the national GDP has declined to 0.77%. 
    • Slowdown in income growth and high unemployment: In 2025, in the 15-29 age bracket, the unemployment rate of UT J&K is more than 30%, which is almost double the national average.
    • Poor Fiscal Health:
      • Decline in fixed and invested capital, accompanied by a sharp rise in borrowings. Despite better revenue mobilisation, J&K’s fiscal health has deteriorated significantly with higher debt and deficits compared to pre-2019. 
      • Internal debt has almost doubled in just five years. Total outstanding liabilities of the UT are now almost 60% of the GSDP. 
      • Fiscal deficit is around 6%, way above the stipulated FRBM limits. 

The economy is heavily reliant on central grants (up to 70% of expenditure), and core sectors like agriculture and industry contribute far less than services.

The road ahead lies in the restoration of J&K’s statehood to usher in participatory democracy in J&K, confer more political, administrative and economic powers to the state government and will uphold federal principles. 

Also Read: Supreme Court upholds abrogation of Article 370 

States cannot demand Delimitation claiming parity with J&K: SC 

Context: The Supreme Court dismissed a petition seeking the Delimitation of Assembly Constituencies in Andhra Pradesh and Telangana on grounds of parity with the recent delimitation exercise in Jammu and Kashmir (2022). 

Relevance of the topic : Prelims : Article 170(3), Delimitation process and legal provisions

What is Delimitation Exercise?

  • Delimitation refers to the process of redrawing the boundaries of constituencies or electoral areas. This ensures that each constituency has a roughly equal number of voters, based on the principle of ‘one vote, one value’.
  • The Constitution under Article 82 mandates delimitation after each census to readjust the seats as per changes in population. (Article 82 for Lok Sabha and Article 170 for State Legislative Assemblies).
  • After each census, a readjustment is to be made in: 
    • allocation of seats in the Lok Sabha to the States
    • division of each State into territorial constituencies.
  • Such an exercise was carried out after the 1951, 1961 and 1971 Census.
  • The 42nd Constitution Amendment Act, 1976 put the delimitation exercise on freeze for 25 years until the 2001 Census to encourage population-limiting measures. 
  • Further, 84th Amendment Act, 2001 put on hold the delimitation exercise again until the first Census after 2026.

The Supreme Court rejected the petition as Article 170 (3) imposes a freeze on delimitation of State Legislative Assembly seats until the first Census after 2026. 

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What Article 170 (3) says?

Article 170 deals with the composition of Legislative Assemblies. 

  • Article 170 (1): Subject to the provisions of Article 333, the Legislative Assembly of each State shall consist of not more than 500, and not less than 60 members chosen by direct election from territorial constituencies in the State.
  • Article 170 (2): 
    • Each State must be divided into territorial constituencies in such a way that the population per seat is roughly equal across the State. This division is based on the most recent census for which final figures have been published.
    • Until the figures of the first post-2026 census figures are published, the term “last census” will mean the 2001 Census. (84th Constitutional Amendment Act, 2001) 
  • Article 170 (3): Until the relevant figures for the first Census taken after the year 2026 have been published, it shall not be necessary to readjust:
    • Total number of seats in the Legislative Assembly of each State as fixed by the Delimitation of Parliamentary and Assembly Constituencies Order, 1976; and
    • Division of each State into territorial constituencies as made by that Order.
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Why was Delimitation allowed in Jammu & Kashmir ? 

  • Jammu & Kashmir became a Union Territory in 2019 after the abrogation of Article 370. As a Union Territory, it is not bound by the freeze under Article 170(3).
  • The delimitation exercise in 2022 was based on the 2011 Census, following the Jammu & Kashmir Reorganisation Act, 2019.

The Supreme Court also held that:  

  • Allowing delimitation for Andhra Pradesh and Telangana through a judicial dictum would foster discontent among other States and breed inequality.
  • Granting such a relief would prompt unabated challenges from other similarly situated regions. In particular, the four NorthEastern States- Arunachal Pradesh, Assam, Manipur, and Nagaland, which were expressly excluded from the scope of delimitation by way of a Central notification in 2021.

Also Read: Delimitation and concerns of South Indian States 

Water sharing dispute between Punjab and Haryana

Context: Tensions escalated between Punjab and Haryana over the Bhakra Beas Management Board’s (BBMB) decision to release an additional 4,500 cusecs of water to Haryana.

Relevance of the topic:

Prelims: Key facts related to Bhakra Nangal dam Project.

Mains: Inter-state water disputes- challenge to Cooperative Federalism. 

Bhakra-Nangal Project

  • Bhakra-Nangal project is among the earliest post-Independence river valley development projects, conceived as early as the 1910s. 
  • It comprises two separate but complementary damson the River Satluj: 
    • Bhakra dam in Himachal Pradesh, and the Nangal dam (10 km downstreams) in Punjab.
    • Nangal dam is an extension of the Bhakra Nangal project and is situated downstream of the Bhakra dam. 
    • Water flows from the Bhakra dam downstream to Nangal dam, where it is controlled and released into the Nangal hydel channel.
  • Before the state was split into Punjab, Haryana, and Himachal Pradesh, the Bhakra-Nangal project was under the direct control of the Punjab government.
  • Bhakra Management Board was established in 1966, under Section 79 of the Punjab Reorganisation Act, to administer the project in the best interests of all three states.
  • Bhakra Management Board was renamed BBMP in 1976, and given the additional task of managing projects on the River Beas, namely the Beas-Sutlej Link Project (Pandoh dam), and Pong dam, both in Himachal.
  • BBMP plays a central role in the distribution of water between Punjab, Haryana, Rajasthan, Himachal Pradesh, and Delhi. At the start of every accounting year (roughly September-August, depending on the monsoon), the BBMP determines how much water would be allocated to each state. For the current year, it allocated 5.512 million acre-feet (MAF) to Punjab, 2.987 MAF to Haryana, and 3.318 MAF to Rajasthan.
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Reasons behind the Current Dispute

  • Haryana’s sought an additional 4,500 cusecs for drinking water, citing scarcity in Hisar, Sirsa, and Fatehabad.
  • Punjab objected to the demand arguing that reservoirs—Bhakra, Pong, and Ranjit Sagar are significantly below average levels due to scant Himalayan snowfall, and any additional release would jeopardise Punjab’s irrigation and drinking water needs.
  • Despite Punjab’s objection, a majority of BBMB member states (Haryana, Rajasthan, Delhi) voted in favour of water release.
  • Punjab declared BBMB’s directive “unprecedented” and “illegal”, refusing to open additional sluice gates.
  • Haryana approached the Supreme Court under Article 131 for enforcement of its entitlement.

Way Forward

  • Establish National Water Commission to conduct real-time water audits and establish a science-based allocation system.
  • Strengthen BBMB by introducing independent hydrological experts, enforce transparency, and ensure consensus-based decisions.
  • Encourage interstate alternative dispute mechanisms before approaching courts.
  • Adopt Climate-Adaptive Planning - Check how much water is really available in dams each year and use weather predictions to decide how to share it, so that no state gets more or less than it should.

Also Read: River Interlinking: Merits & Challenges  

Water sharing dispute between Punjab and Haryana reflect the deeper fault lines in inter-state relations and resource governance. It underscores the urgency for a transparent, evidence-based, science-driven, and equitable water-sharing framework.  

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. 

Constitution of High-Level Committee on Centre-State Relations:

  • In line with this philosophy, the TN government announced the formation of a three-member high-level committee in the Legislative Assembly.
  • Purpose:
    • To review existing Constitutional provisions, laws, and policies related to Centre-State relations.
    • To recommend steps to enhance States’ autonomy and restore a balanced federal structure.
  • This is seen as a logical progression in Tamil Nadu's ongoing demand for greater decentralisation

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 3/4th 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. 
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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.

District-level GDP Estimation

Context: In keeping with the international standards, India’s economic growth story has long been measured through National level GDP Estimates. Yet the most critical unit of development- the district- remains an economic blind-spot. 

Relevance of the Topic: Mains: District-level GDP Estimation- Issues, Need, Challenges, Way Forward

Limitations of the Current GDP Estimation Methodology

  • Top-down Approach:
    • Economic output is first estimated at the national level and then apportioned to States and districts. This method does not measure economic activity directly at the district level.
  • Sectoral Challenges:
    • Primary Sector (Agriculture, Forestry, Fishing, Mining):
      • Uses a bottom-up approach, aggregating data from districts to the national level.
      • However, data collection methods are often outdated and inconsistent.
    • Secondary & Tertiary sectors (Manufacturing, Construction, Services, etc.):
      • Relies on a top-down approach, using indicators like employment levels, wages, and infrastructure presence.
      • Fails to capture real-time economic activity or the sectoral contribution of districts.
  • Data Gaps and Inaccuracies:
    • The unorganised sector and informal economic activities are poorly captured.
    • Survey methodologies are inconsistent, leading to unreliable estimates.
    • Economic reality at the district level is often misrepresented.

Need for District Domestic Product (DDP) Estimation

  • Granular data for policymaking: Helps tailor policy interventions to address economic disparities at the district level.
  • Localised economic planning:
    • Identifies sector-specific growth opportunities for each district.
    • Enables targeted investments in agriculture, manufacturing, or services as needed.
  • Strengthening Fiscal federalism:
    • Empowers districts to develop independent economic strategies aligned with national and state goals.
  • Case Study: Uttar Pradesh (UP) & COVID-19: 
    • During 2020-21, GDP data was distributed using the traditional method, which did not reflect UP’s economic reality.
    • UP’s agriculture sector contributed 25% of its Gross State Value Added (GSVA) and was less impacted than manufacturing.
    • The state advocated for a bottom-up approach to estimate GDP more accurately.
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Challenges in Implementing district-level GDP estimation:

  • Financial and logistical investment: Requires substantial funding for data collection and statistical infrastructure.
  • Collaboration between Central & State agencies: Needs coordination between MoSPI and state statistical departments.
  • Capacity building: Training local officials to collect and analyze economic data.

Way Forward

  • Investment in data infrastructure: Every $1 invested in statistics leads to $32 in economic development.
  • Real-time economic monitoring: Use digital tools, AI, and big data analytics to track economic activities.
  • Incorporating DDP in Viksit Bharat 2047 vision: Empowering districts for equitable and inclusive growth.

A robust district-level economic measurement framework will ensure balanced growth, making India’s journey toward a $5 trillion economy more inclusive and sustainable.

Delimitation and concerns of South Indian States

Context: The Union Home Minister of India said that the delimitation exercise will not affect the southern States as new seats will be allocated on a pro rata basis, promising that the southern States would get their rightful share of any increase in seats.

Also, Parliament has passed the Constitution 106th Amendment Act which proposes to reserve 1/3rd seats for women in the Lok Sabha and State Legislative Assemblies following the delimitation exercise. However, delimitation exercise has induced fears among the south Indian states who claim that they will be penalised for controlling fertility and will lose on representation and financial transfers. 

Relevance of the topic:

Prelims: Key facts about Delimitation Commission.

Mains: Delimitation Exercise: Impacts and Challenges

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Background

  • The inter-state delimitation of seats among the states for Lok Sabha has been on hold since the 1972 census. 
  • The Parliament has passed the Constitution 106th Amendment Act which proposes to reserve 1/3rd seats for women in the Lok Sabha and State Legislative Assemblies following the delimitation exercise. 
  • States in Southern India feel that delimitation based on the latest population data will reduce their representation in the Parliament. They fear that they will be penalised for controlling fertility and will lose on representation and financial transfers. 
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What is Delimitation?

  • Delimitation refers to the process of redrawing the boundaries of constituencies or electoral areas. This process is carried out periodically to ensure that each constituency has a roughly equal number of voters, based on the principle of “one vote, one value.” 
  • After each census, a readjustment is to made in (a) allocation of seats in the Lok Sabha to the States, and (b) division of each state into territorial constituencies. Such an exercise was carried out after 1951, 1961 and 1971 census. (Article 82 for Lok Sabha and Article 170 for State Legislative Assemblies).
  • Parliament is empowered to determine the authority and the manner in which delimitation is to be made.
  • Delimitation is necessary because population distribution changes over time, with some areas experiencing significant growth while others may decline. This can result in a situation where certain constituencies have a much larger or smaller number of voters compared to others, leading to an imbalance in representation.

About Delimitation Commission:

  • Delimitation Commission is appointed by the President of India.
  • Composition:
    • Chief Election Commissioner (CEC) or an Election Commissioner nominated by CEC
    • Retired or serving Judge of Supreme Court 
    • Election Commissioner of the concerned State.
  • Orders of Delimitation Commission cannot be called in question before any court of law.
  • The copies of its orders are laid before the House of People and State Legislative Assembly concerned, but no modifications are permissible therein by them.

Constitutional provisions for delimitation:

  • Article 82 and 170 of the Indian constitution provides for the delimitation exercise at the level of Lok Sabha and State legislative assembly respectively.
  • Constitutional freezing of delimitation exercise:
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Impact of Delimitation:

  • Balancing the Political Power (Gerrymandering): Delimitation can alter the distribution of political power among different regions and communities. The Redrawal of the constituencies can impact the electoral prospects of political parties and candidates. E.g., During 2008 delimitation exercise, Jharkhand witnessed a significant realignment of political power when the boundaries of constituencies were redrawn. 
  • Addressing Demographic Shifts: In 2002, constituencies in states like Maharashtra and Tamil Nadu were redefined to address the substantial population growth in urban areas. It paved the way for better reflection of population changes and ensured that urban centers had adequate representation in the legislative bodies. 
  • Minority Representation: Delimitation exercises have been instrumental in ensuring better representation for minority communities. In the 2008 delimitation exercise, constituencies in regions with a significant concentration of minority communities, such as Malappuram in Kerala.
  • Enhanced Gender Representation: Delimitation exercises have also contributed to improving gender representation in politics. E.g., during the 2008 delimitation exercise, the constituencies in certain states were redrawn to facilitate reservation of seats for women in local bodies.
  • Fair Representation: Delimitation aims to ensure fair representation by readjusting the boundaries of constituencies based on population changes. It helps in balancing the number of voters per representative, ensuring that each vote holds relatively equal weight and upholding the democratic principle of “one person, one vote.”

Issues associated with Delimitation:

  • May result in decreased representation for States that have achieved population stabilization. E.g., Kerala, Tamil Nadu. 
  • May lead to increased representation for States that are still experiencing population growth and have not yet achieved stability.
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  • Issues of minority representation: Sachar commission has recommended that constituencies with high minority population should not be reserved for schedule castes. But, there have been reports of not adhering to such principles in the recently conducted delimitation exercise of Assam.
  • Delimitation exercises often face challenges in implementation due to logistical and administrative issues. For instance, the delimitation exercise planned for the state of Jammu and Kashmir faced delays and obstacles due to the unique circumstances and complexities of the region.

Roadmap for Future

  • It is essential to ensure that the delimitation process is carried out fairly, transparently, and with adequate consideration for the interests of all communities and regions.
  • Option 1: Delimitation Commission can choose to implement freezing of seats, until all States have achieve population stabilization. 
  • Option 2: Delimitation Commission can develop a customized mathematical model inspired by the ‘Cambridge Compromise’. This model would aim to provide a mathematically equitable formula for the allocation of seats, similar to the apportionment of seats in the European Parliament. #Best Practice
  • Option 3: Punchhi commission has recommended that states should be given equal representation in Rajya Sabha on the lines of American Senate model. This would help in countering the power asymmetry between states in the Lok sabha. Thus, guaranteeing states of not losing their representation and voice in Rajya Sabha.
  • Option 4: Seats in the Lok Sabha may be capped at 543 whereas the number of MLAs in each state may be increased in line with current population. This may help in reconciling the democratic and federal principles of the delimitation exercise. 

States can regulate industrial alcohol

Context:  A Constitution Bench of nine judges in an 8:1 majority judgment has upheld the State legislatures’ right to regulate industrial alcohol. (State of U.P. vs. M/s. Lalta Prasad Vaish)

The majority opinion held that the phrase “intoxicating liquor” in Entry 8 of the State List in the Seventh Schedule of the Constitution would include industrial alcohol within its ambit. 

Background: Entry 8 gives States the power to regulate the production, manufacture, possession, transport, purchase, and sale of “intoxicating liquor”. Various States had challenged the Centre’s position that it had exclusive control over industrial alcohol, a power held under Entry 52 of the Union List.

Key issues: Can “intoxicating liquor” also be defined as “industrial alcohol”?

  • There are two “overlapping” entries in the Seventh Schedule of the Constitution, which lays down the division of lawmaking powers between the Centre and the states.
  • Entry 8 of List II (State List) gives states the power to regulate “the production, manufacture, possession, transport, purchase and sale of intoxicating liquors,” whereas Entry 52 of List I (Union List) allows the Centre to regulate industries as a whole to the extent “declared by Parliament by law to be expedient in the public interest”.
  • As alcohol and other products of fermentation industries that deal with non-drinkable alcohol are included in the Industries (Development and Regulation) Act, 1951 — a law passed by Parliament — the Centre argued that it “occupied the field” when it comes to industrial alcohol, and that states could not regulate the subject.
  • States, on the other hand, argued that industrial alcohol can be misused to produce consumable alcohol illegally, which required them to enact legislation.

The key question of Law: Whether a central law, the Industries (Development and Regulation) Act (IDRA), 1951, which listed ‘fermentation industries’ as a scheduled subject on which the Union government could exercise control, had the effect of removing ‘industrial alcohol’ from the regulatory purview of State governments.

Judgment: The ruling set aside the SC’s 1990 judgment in Synthetics & Chemicals Ltd. v State of Uttar Pradesh, which held that “intoxicating liquor” refers only to potable (drinkable) alcohol and, therefore, states could not tax industrial alcohol.

Outcomes of judgment

  • Increased amount of taxes/revenue: The tax levied on alcohol is a key component of a state’s revenue. With the inclusion of industrial alcohol, states would be able to regulate it accordingly. The additional taxes accruing would be used for funding essential public services.
    • This judgment along with the recent judgment in which the SC ruled that States can tax mineral rights and mineral bearing lands is going to boost the State’s  revenues further.
  • Clarity on Centre-State Relations: It also clarifies Centre-state relations regarding control over industries. The judgment affirms the power of states to pass laws on subjects in the State List, even in the face of the wide powers granted to the Centre regarding the control of ‘Industries’ as a whole.
  • Maintaining federal balance: It affirms the principle that when a Central law (Section 18G of Industries Development and Regulation Act, 1951) accidentally steps into areas controlled by the State Governments, the States should not lose their power over those areas, this principle has been respected in this case by checking legislative competence of Centre and maintaining federal balance.
  • Regulatory clarity: Judgment would bring regulatory clarity over the taxation, which would prove to be positive for manufacturers.
  • Improved law and order: More powers with respect to regulation and taxation would lead to better checks on the leakage of industrial liquor, which is often used for making illicit liquor responsible for deaths due to it.

About Industrial Alcohol

  • Industrial alcohol is essentially impure alcohol that is used as an industrial solvent. It is made by mixing chemicals such as benzene, pyridine, gasoline, etc. in ethanol, which is produced by fermenting grains, fruit, molasses, etc., this process is called ‘denaturation’ which turns ethanol into industrial alcohol. This makes the alcohol unfit for human consumption, and significantly lowers its price.
  • Industries use this impure alcohol to manufacture products like pharmaceuticals, perfumes, cosmetics, and cleaning liquids.
  • However, this same industrial or denatured alcohol is sometimes used to make illicit liquor, cheap and dangerous intoxicants whose consumption poses severe risks, including blindness and death.

Supreme Court Judgement on Taxation powers on Minerals

Context: A 9-Judge Constitution Bench of the Supreme Court in the Mineral Area Development Authority (MADA) vs SAIL declared that royalty imposed on mining is not a tax. Thus, the court overruled the its own seven judge bench judgment in the India Cements vs State of Tamil Nadu judgement (1989), which ruled that royalty are a tax.

Distribution of legislative power over mines and minerals under the Seventh Schedule

  • Entry 54 of Union List: Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest. 
  • Entry 23 of State List: Regulation of mines and mineral development subject to the provisions of Union List with respect to regulation and development under the control of the Union.
  • Entry 50 of State List: Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.

Statutes relating to Taxation of Minerals: MMRD Act

  • Parliament enacted the Mines & Minerals (Development & Regulation) Act, 1957 (MMDR Act) under the Entry 54 of the Union List of Seventh Schedule. MMDR Act is a comprehensive code for regulation of mines and development of minerals.
  • MMDR Act provides that holder of a mining lease shall pay royalty in respect of any mineral removed or consumed from the leased area at the specified rates.
  • Dispute over the nature of Royalty: There has been a dispute over the nature of royalty i.e., whether it is a tax or not. A Seven Judgement Constitution Bench of Supreme Court in the India Cements vs State of Tamil Nadu (1989) ruled that royalty imposed on mining are a tax in nature. However, a 5 judge constitution bench in State of West Bengal vs Kesoram Industries ruled that royalty is a not a tax. However, since India Cements judgement was given by a larger 9 judge bench, it continued to hold.

Nature of a Tax

  • Tax is a compulsory exaction of money by a public authority.
  • Tax is imposed under statutory power without consent of tax payer.
  • Tax demand is enforceable by law
  • Tax is an imposition made for public purpose to meet general expenses of the state without reference to any special benefit to be conferred on the payer of the tax.
  • Tax is a part of common burden.

Salient Observation in MADA Judgement

  • Royalty is not a tax but a contractual consideration paid by the mining lessee for enjoyment of mineral rights. 
  • Legislative power to tax mineral rights vests with the State legislatures. Parliament does not have legislative competence to tax mineral rights under Entry 54 of Union List, since this is a general entry. Power to tax mineral rights is expressly enumerated in Entry 50 of State List, therefore, Parliament cannot use its residuary powers in this matter.
  • Entry of 50 of State List envisages that Parliament can impose 'any limitations' on mineral taxation by states. However, the MMDR Act has not imposed any limitations. 

Bihar, Andhra Pradesh likely to demand for special category status (SCS)

Context: The talks over special category status for the states of Bihar and Andhra Pradesh have once again gained momentum after the victory of the BJP-led National Democratic Alliance (NDA) in the 2024 Lok Sabha elections.

About Special Category Status (SCS): 

  • It is a classification granted by the Centre to assist the development of States that face geographical or socioeconomic disadvantages. 
  • Also to safeguard the interest and aspirations of certain backward regions or to protect cultural and economic interests of the tribal people or to deal with the disturbed law and order in some parts of India.
  • It was introduced in 1969 on the recommendation of the Fourth Finance Commission (FC). 
  • The criteria for SCS are based on Gadgil Mukherjee formula: 
    • Hilly and difficult terrain
    • Low population density and/or sizeable share of tribal population 
    • Strategic location along international borders 
    • Economic and infrastructural backwardness and 
    • Nonviable nature of state finances.
  • The 14th and 15th Finance Commissions have increased the devolution of divisible pool funds to states from 32% to 41%. However, 14th FC did not consider special category states in its recommendations even 15th FC made no mention of the SCS.
  • 14th FC proposed the continuation of higher grants and lower cost sharing for central government and centrally sponsored projects.

Constitutional provision of SCS: 

  • The Indian Constitution does not provide for 'special category states.' However, states have special provisions under Articles 371, 371-A to 371-H, and 371-J.

States under SCS:

  • Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana, have been designated as special category states.

Why are Bihar and Andhra Pradesh demanding Special Category Status?

  • Bihar: Bihar has been asking for it ever since the mineral-rich Jharkhand was carved out of it back in 2000. 
    • Bihar has been ranked as the poorest state in India, according to the Centre's ‘Multidimensional Poverty Index’ (MPI) report. It is estimated to have nearly 52% of its population, without having proper access to requisite health, education and living standards.
    • While the state meets most of the criteria for the Special Category Status, it does not fulfil the criteria of hilly terrain and geographically difficult areas.
  • Andhra Pradesh: 
    • After its bifurcation in 2014, Andhra Pradesh has also seen many of its political leaders demanding a Special Category Status on the grounds of revenue loss due to the city of Hyderabad going to Telangana.

Benefits provided to SCS:

  • For Special Category States 90% of the Central assistance is given as grant and 10% as Loan. In the case of Non-Special Category States, however only 30% of NCA is given as grant and 70% as Loan.
  • Special packages are purely discretionary. They may be need-based, but the need is not the proximate reason for granting a special package, which is an additional grant under Article 282, which falls under ‘Miscellaneous Financial Provisions’.
  • Tax sops  such as concession on Customs duty, income tax and corporate tax etc. for industrial development. 
  • Special category states can carry forward unspent money from one financial year to the next without it lapsing.

Benefits for Special category status: 

  1. To preserve cultural identity (Goa).
  2. To address socio-economic and infrastructural backwardness (Bihar).
  3. To compensate for the loss of taxation rights under the GST mechanism.
  4. To provide special support for recovery and resilient infrastructure due to frequent natural calamities, such as earthquakes, floods, or cyclones (Odisha).
  5. To enhance infrastructure for national security, particularly in areas near international borders (Rajasthan).

Challenges associated with SCS: 

  • It places an additional economic burden on the center and fosters a culture of economic dependency among states.
  • Granting special status to one state often prompts similar requests from other states.
  • It will weaken the foundations of fiscal federalism, as it will result in diverting national resources away from other States, which too may have pressing needs.
  • May be driven by political motives instead of objective criteria and become a tool of political bargaining.

Way forward

Recommendations of Raghuram Rajan Committee: 

  • Suggested "multi-dimensional index" of backwardness is proposed, based on per capita consumption according to National Sample Survey Organisation (NSSO) data, poverty ratios, and other measures aligned with the multi-dimensional approach to defining poverty in the 12th Five-Year Plan.
  • States that score 0.6 and above on the Index may be classified as "least developed"; States that score below 0.6 and above 0.4 may be classified as "less developed"; and States that score below 0.4 may be classified as "relatively developed".
  • Each state should get a basic fixed allocation and an additional allocation depending on its development needs and development performance.
  • Design specialized programs that address the needs of vulnerable groups with a focus on preserving their cultural identities.

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