Centre - State Relationship

Discussion in 'Politics & Society' started by Ray, Mar 25, 2012.

  1. Ray

    Ray The Chairman Defence Professionals Moderator

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    The ‘municipality’ strikes back

    The recent controversy around establishment of the NCTC as being violative of the federal structure of our Constitution has rocked the ruling UPA coalition at the Centre. Notwithstanding the political brinkmanship and the sordid bargaining that went on behind the scenes, this has once again underscored the urgent need to have a relook at Centre-state relations .

    Apart from the NCTC, pending legislation on the Lokpal brought to the fore the dispute concerning the Centre's power to legislate on Lokayuktas of our states. Many pending legislations - such as those seeking to give the BSF authority to police extended territories rather than the nowlimited areas around the border (there's also a strong perception that certain provisions of the Prevention of Communal Violence Bill encroach upon the states' rights of law and order) - raise the spectre of a more unitary set-up , rather than the constitutionally mandated federal structure.

    The Indian Constitution begins with its first clause defining "India, that is, Bharat, is a union of states" . Clearly, there is no India without the states. The experience of the last few decades, however, shows a systematic erosion of the federal content and before this reaches the proportions of raising potentially dangerous disputes of disharmony, it needs to be addressed.

    In the aftermath of the Emergency and the consequent political churning in the country, the first Left Front government of West Bengal sought a realignment of Centre-state relations on a 15-point agenda. The emergence of regional ruling parties in several important states led to a series of conclaves on this issue whose principle theme was that devolution of economic powers, resources and decisionmaking , instead of weakening the Centre, would actually strengthen its base. Consequently, the Sarkaria Commission was appointed in 1983; its 1988 report remains unimplemented, in large measure, till date.

    Apart from inflammatory political issues on the misuse of Articles 355 and 356 leading to the dismissal of elected state governments, there are very important financial, administrative and legislative matters that need to be resolved. The Seventh Schedule of our Constitution clearly delineates the responsibilities of the Centre and the states with Union, State and Concurrent lists of subjects. While there is constant encroachment over the states' list, the improper and inadequate financial distribution of resources from the Centre to the states has assumed serious proportions.

    The states are assigned the responsibilities of basic human and economic development like education, health, agriculture, irrigation, roads, power, etc, and have to incur basic administrative expenditures as well as those on law and order and general administration.

    However, the more important powers of raising revenue lie with the Centre. For instance, in 2004-05 , while the states undertook 60.8% of total development expenditure , their share in the total revenue receipts was merely 38%. Over the years, the constitutionally presumed equal sharing of revenue between Centre and states (50%) never materialised. The last Finance Commission had also recommended that only 32% be devolved to states. The states' right to raise revenues is very limited and such dependence on the Centre reduces them, as the late Jyoti Basu once said, to "glorified municipalities" .

    Further, with the onset of neoliberal economic reforms, there has been constant decline in the tax-GDP ratio, implying a further shrinking of states' share of resources. While the Centre decides on various tax concessions (Rs 15.28 lakh crores in 2011-12 ), the states are never compensated for the consequent loss of their share. Even the decision to transfer centrally sponsored welfare schemes to the states with funding (May 1996) has not materialised.

    International treaties like the WTO agreement on agriculture, free trade agreements that adversely affect crucial state subjects like agriculture are unilaterally decided. The states are never compensated for the huge losses.

    Under pressure from the Left, the VP Singh government in 1990 constituted the Inter-State Council under Article 263 of the Constitution. It effectively remains only on paper. The National Development Council today has been reduced to a declamation forum of chief ministers with written speeches. It should be given constitutional status and the Planning Commission should function as its secretariat or executive wing. These issues should be resolved urgently, with regular meetings of the constitutionally mandated Inter-State Council.

    - Sitaram Yechury

    The ‘municipality’ strikes back - The Times of India
     
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  3. Ray

    Ray The Chairman Defence Professionals Moderator

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    Point of departure

    The prickly question of federalism was never settled in India's complex politics. The recent escalation in Centre-state confrontations over issues ranging from economic reforms to terrorism may just be a pointer towards a possible realignment of political forces in the country. Are we then looking at a second wave of federalism?

    In the 1990s the Mandal upsurge, while fracturing India's political structure, threw up fragmented yet powerful regional entities which transformed Indian Parliament's character. The emergence of regional stalwarts - Lalu Prasad, Mulayam Singh Yadav and Mayawati in north India - tipped the scales against the Congress which, till then, had been firmly in charge. Meanwhile, in the southern states of Andhra Pradesh and Tamil Nadu a strong anti-Congress sentiment had already been present for decades. These developments made complicated coalition politics a reality of Indian polity.

    The possible second wave of federalism unfolding today has regional parties asserting more than ever before. Regularly staring the Centre down, they are decisively marking out their territories of control. Under this mounting pressure the UPA has stalled key policies like FDI in retail, Lokayuktas , and now the controversial National Counter-Terrorism Centre (NCTC). Besides territorial tensions, there's a deeper story of affront and condescension running through the uneven Centre-state relations. Delhi's durbari political culture, despite Mandalisation, still remains somewhat suspicious of regional forces. Time and again state leaders have expressed their anguish at being slighted by an overbearing Centre.

    In her recent media interviews, Mamata Banerjee spoke of her "humiliation and hurt" for repeatedly having to ask for a financial package to put Bengal back on its feet. And the Trinamool chief minister is not alone in feeling the pinch of insult. CMs of the forgotten northeastern states, too, have complained of being kept waiting in Delhi for days just for an audience with the Prime Minister. Recently, Orissa chief minister Naveen Patnaik complained that top UPA ministers were not heeding his calls on the Maoist abduction crisis. The Centre's blithe dismissal of federal aspirations as nothing but partisan gimmicks is hardly a balm on such wounded sentiments .

    Amid these contrary pulls and tensions , an alternative vision of governance is taking shape. The buzz about crystallisation of a federal front, with an eye on the 2014 general elections, is growing louder. Lending credibility to such speculation is the poor performance of the Congress and the BJP in the recent assembly elections and the regional parties' growing clout. Centre-state power relations may soon need to be renegotiated. "India is a centralised federation. It needs to be more responsive to sub-regional identities," says professor Kamal Mitra Chenoy of Jawaharlal Nehru University (JNU). Regional parties resent the "virtual tyranny"of the national parties, he adds.

    At the moment nothing seems to be going right for the two national parties which, so far, have functioned as coalition pivots, ranged at opposing ends of the political spectrum. The Congress-backed Third Front-led government of 1996, which had a turbulent 18-month stint in power, was a different kind of alliance. Could there be a 'regional front' in place of a 'third front' in the next general elections?

    If the recent assembly polls are a measure of the country's popular mood, the Congress and the BJP are walking on thin ice. And the reasons for voter disenchantment are not hard to find. Given people's disconnect with the two national parties, voters appear to rely on regional parties to fulfill their diverse aspirations. Pushed on the backfoot by big-ticket scams and poor political strategy, not to mention apparent arrogance, the ruling Congress has been hurtling from one crisis to another. Its principal rival, the BJP, too, is floundering . Recent episodes - a powerful B S Yeddyurappa raising the spectre of a fullblown rebellion against his own party in Karnataka, and the fiasco of backing NRI businessman Anshuman Sinha for a Rajya Sabha seat from Jharkhand - have hardly added to the BJP's credentials as a trustworthy alternative to the Congress.

    The space for a non-Congress , non-BJP alternative, which was once a possibility, seems to be opening up again. In fact there's an impressive array of regional leaders - Mamata, Patnaik, J Jayalalithaa , Nitish Kumar, Akhilesh Yadav, the Badals of Punjab - waiting to step into this vacant space. A look at the distribution of power in India is instructive. The sprawling Hindi heartland is dominated by regional parties, which are ready to negotiate new terms of contract with the Centre. "Regional aspirations are now articulated in terms of safeguarding regional autonomy for governance and law-making . The sense of being empowered manifests itself when states checkmate the Centre's attempts to encroach upon their territory," says Abhay Kumar Dubey, political analyst at the Centre for the Study of Developing Societies (CSDS). The recent elections saw the Samajwadi Party dislodge the Bahujan Samaj Party in a decisive victory in politically crucial UP. The BJP and Congress continued to stagnate in third and fourth positions. Similarly, Bihar, too, going the federal way, has thrown its weight behind the Janata Dal (U). In Punjab, despite anti-incumbency , the Akali Dal retained power. More recently, the Congress lost all seven assembly byelection seats in Andhra, while the Telengana Rashtriya Samiti (TRS), spearheading a militant Telengana struggle, won four of them.

    In the east, Bengal's new regime under Mamata is sticking to the Left Front's strident federalism. In neighbouring Orissa, Naveen Patnaik, staunchly advocating the rights of states, has opened back-channel talks with 'like-minded' regional leaders.

    There's no doubt that India's political establishment could well be bracing for another restructuring of power relations and electoral equations. According to Congress minister Sachin Pilot, "That there are nearly 40 political parties in Parliament today shows that federalism can't be ignored. Regional parties are able to vocalise voters' aspirations effectively. As a national party, the Congress will have to work with them." But the Congress continues to be ill at ease with political and administrative collaboration. "The BJP is a far more coalition-friendly party than the Congress," says Dubey. "But its acceptability among allies will go up only if the party can shed its communal ideology." Tough tasks for both the Congress and the BJP.

    Point of departure - The Times of India
     
  4. Ray

    Ray The Chairman Defence Professionals Moderator

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    Paisa vasool: GST & other jousts

    The states and the Centre aren't just squabbling over the NCTC and permitting FDI in retail chains. There is a slightly lowerprofile battle on over how India should move towards a unified Goods & Service Tax (GST), billed as the biggest tax reform. All state governments led by Bihar deputy CM Sushil Modi, who heads the empowered group of state finance ministers, seem to be on the same wavelength on the issue.

    At the heart of the dispute is the phasing out of central sales tax, which used to be levied at 4% on all inter-state trade in goods in addition to the central excise and the state VAT. As part of the progression towards GST, states were to phase it out and the Centre was to compensate them for the loss in revenue during the transition.

    But just when CST was halved, the fiscal battle began, leading to an indefinite postponement of the GST rollout, initially supposed to happen in April 2010. Now, no one knows when that tax reform will ultimately happen since talks have completely collapsed and the very basis of GST is being questioned.

    Amid the confusion Modi dashed off a letter to finance minister Pranab Mukherjee on February 14 and another on the eve of the budget. He demanded that CST either be enhanced back to 4% or full compensation be paid to the states for the cut. But Mukherjee refused to provide funds in the budget for any such compensation. "The compensation was originally planned for three years. Government of India cannot keep paying compensation endlessly for as many years as GST does not come," finance secretary R S Gujral said earlier this week, even as the FM has chosen not to comment on the issue. There is little else that the Centre can now do to pressurise states to agree to GST. After all, the Constitution clearly lays down the terms of the fiscal relationship.

    While the Centre collects direct (such as income and corporation tax) and indirect (excise, customs and service tax) taxes, it has to share the collections with the states, the formula for the sharing decided every five years by the Finance Commission. It also prescribes that grants-in-aid be provided to the states. Since the constitutional amendments in 1992, the commission also earmarks funds that directly go to panchayats and municipalities.

    So, the last commission, which submitted its report in 2010, prescribed that 32% of the Centre's gross tax receipts be shared with the states, compared to 30.5% up to March 2010. As a result, of the Rs 10.7 lakh crore that Mukherjee hopes to collect through direct and indirect taxes in 2012-13 , a little over Rs 3 lakh crore will be transferred to state governments.

    Over the years, states have got a higher share of the Centre's kitty. Earlier, they were only entitled to a part of income tax and excise, but since 2000 the scope has been expanded. There are other incentives, too, that come for states improving their fiscal situation. For instance, thanks to the recommendations of the 12th Finance Commission (2005-2010 ), most states can today boast of having cash surpluses, which add up to over Rs 50,000 crore.

    A far cry from the days when the states were only seeking bailouts from the Centre and overdrafts from the Reserve Bank of India. Of course, there are the likes of West Bengal, Kerala and Punjab, which refuse to learn and are back with a begging bowl.

    Paisa vasool: GST & other jousts - The Times of India
     
  5. Ray

    Ray The Chairman Defence Professionals Moderator

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    Centre action, opposite reaction

    In October 2009, at the height of the Mullaperiyar dam dispute between Tamil Nadu and Kerala , relations between the DMK government and the Centre hit a new low. Then chief minister M Karunanidhi dashed off a letter to Prime Minister Manmohan Singh, requesting him to immediately direct his environment minister Jairam Ramesh to withdraw a decision of the National Board for Wildlife , permitting Kerala to carry out a survey in the Periyar Tiger Reserve for a new dam. The DMK even threatened to hold a public meeting to condemn the minister, who hastily declared that he was not anti-Tamil Nadu. How could he be when his wife was 100% Tamilian and he was partly one himself?

    Centre-state relations have always been a touchy issue in Tamil Nadu, especially since the advent of coalition politics. While the DMK, a part of most coalition setups at the Centre, has applied subtle pressure, the AIADMK, barring one tumultuous year in 1998 as a constituent of the Vajpayee-led government , has been at loggerheads with the Union government all along.

    Since her return to power in Tamil Nadu in 2011, J Jayalalithaa has confronted the Centre on a range of issues. AIADMK Rajya Sabha member V Maitreyan says the differences stem from the Centre's attempts to legislate and govern on behalf of the states. "The UPA government has been persistently undermining the concept of federalism and harmonious Centrestate relations. Be it on the proposed NCTC or the Lokayukta or various education bills, the Centre is forcing itself on the states," he says. In the name of fighting terrorism, what the UPA is doing is fighting against federalism, says Maitreyan. "In an era where regional aspirations are on the rise, the UPA government can continue its anti-federal policy only at its own peril."

    Some of the friction can be attributed to what is perceived as the Centre's unilateral approach to policies having a bearing on states. For instance, when the food security bill was tabled in Parliament, Jayalalithaa took exception to the proposal to introduce a targeted public distribution system that would cover only the most needy sections as against the universal or near-universal system existing in certain regions, especially the south. The Centre's plan would certainly reduce subsidy grants for better-performing states including Kerala, Chhattisgarh and Andhra. For Tamil Nadu, it would entail an additional annual burden of about Rs 1,800 crore to make up for the shortfall. Jayalalithaa's criticism of the new food security regime seems justified if seen in light of the fact that the state uses the food subsidy mechanism well to maximise the welfare claims of its people.

    Given the Centre's inability to structure policies according to the needs of each region, the mantra of federalism is bound to increasingly strike a chord in non-Congress-ruled states.


    Centre action, opposite reaction - The Times of India
     
  6. Ray

    Ray The Chairman Defence Professionals Moderator

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    Interesting and though provoking articles in the Sunday Times.

    Read them and let us know what is your take.
     

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