CU-BA SEM III-Political Science-Second Draft-converted

Answer 1-d, 2-b, 3-a, 4-c, 5-a 6.11 REFERENCES • Basu, D.D. (2011).Introduction to the Constitution of India, (20thed.). Nagpur, India: Lexis Nexis Butterworths Wardha. • Choubey, S. K. (2009). The Making and Working of the Indian Constitution. New Delhi, India: National Book Trust. • Granville, Austin (2012). The Indian Constitution: Cornerstone of a Nation, (17thed.). New Delhi: Oxford University Press. Web resources • https://www.constitutionofindia.net › • https://www.jagranjosh.com/general-knowledge/the-constituent-assembly-of-india- 1434780545-1 • https://www.topperlearning.com 151 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT – 7: NATURE OF INDIAN FEDERALISM: MEANING, NATURE AND FEATURES Structure 7.0 learning objectives 7.1 Introductions 7.2 Federation: Its nature 7.3 Federalism in India 7.3.1 The Structure of the Indian Federation. 7.3.2 Territories of the States 7.3.3 Structure of Government. 7.3.4 Division of Powers 7.5 relations with union state 7.4.1 The Financial Powers of the Union and the States 7.5 The Union Territories 7.8 Summary 7.9 Keywords 7.10 Learning activity 7.11 Unit End Questions 7.12 References 7.0 LEARNING OBJECTIVES After studying this unit, you will be able to explain

• Explain the meaning of the concept of federalism; • Outline the federalism in the light of polities in India; • Identify the issues which are related to federalism in India • Discuss the relationships among different units of Indian federal system. 7.1 INTRODUCTION Federalism is a form of government in which the sovereign authority of political power is divided between the various units. This form of government is also called a \"federation\" or a \"federal state\" in the common parlance. These units are Centre, state and panchayats or the municipalities. The centre also is called union. The component units of the union are called variously as states (in the United States of America), Cantons (in Switzerland), Prouinee (in Canada). Republics (in the former Union of Soviet Socialist Republic). Literally, the word 'federal' means contractual. A federal union is a contractual union. A federal state is a state brought into being through a contractual union of sovereign states. The union of states by conquest cannot be called a federal union. 153 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 7.1 Federalism 154 CU IDOL SELF LEARNING MATERIAL (SLM)

7.2 FEDERATION: ITS NATURE Fig 7.2 A federation is formed on the basis of principles of a contract. It means that the sovereign units-union. states or local units, form a federation on the basis of mutual and voluntary agreement. This kind of voluntary union1 federation is possible only in a democratic framework. It also means that the extent of million is limited. The contracting parties never surrender their complete authority power. Thus, when two or more sovereign states unite voluntarily, they retain their internal/local autonomy and unite only on matters of common interest. More than a hundred years ago. therefore, James Bryce declared that 'A federal state is a political contrivance intended to reconcile national unity and power with the maintenance of state rights.' In actual practice, however, not all-federal states have been born through union of sovereign states. Many of them have been products of devolution of powers by a centralized authority of a union government to the lower units. Indian federation in one such example. 7.3 FEDERALISM IN INDIA Federalism in India has some similarities with that of U.S.A. The Constitution of India like the Constitution of U.S.A, which is the oldest federation, nowhere uses the term \"federation” or \"federal union\". Both countries have dual polity - one for the Central I Union 155 CU IDOL SELF LEARNING MATERIAL (SLM)

government: and another for the state government. But there are two main differences between them. A person in USA has dual citizenship. One of the states where he resides and another the citizenship of his/her country U.S.A. There is no dual citizenship in India. Fig 7.3 An Indian citizen has only one citizenship - Indian. Here is no separate citizenship for the state where a person resides. Besides, apart from the constitution for the USA: each state has its own constitution. But these are loosely interrelated. In India there is only single constitution for the whole country, with the exception of the state of Jammu and Kashmir. * The Article 1 of the Constitution of India describes India as a '-Union of states\" for Indian federalism. The word \"Union\" has been used because according to Ambedkar the \"federation in India was not a result of an agreement between different states to join a Federation\". As mentioned earlier, the federation in India is the result of the devolution of power, not the result of an agreement. This does not give a state the right to secede from India. But the pattern of division of power under the Constitution renders it a federal character. This federal character was given by the framers of the Constitution primarily for two reasons: 1) A federal state is more effective than a unitary one when the size of its territory is as large as India. 2) A federal state is more effective than a unitary one when diverse groups of its population live in a discrete territorial concentration as in India. 156 CU IDOL SELF LEARNING MATERIAL (SLM)

7.3.1 The Structure of the Indian Federation. Table 7.1 Structure of the Indian Federation The Constitution of India is written and relatively rigid. Several provisions of the Constitution can be amended only with the consent of a majority of the state legislatures. The Constitution divides power between the Union and the states. The Supreme Court of India has original jurisdiction to decide disputes between: a) The Union and a state or a group of states: b) One state and another state or a group of' other states; and c) One group of states and another group of' states. The constitution of India has not described India as a federation. However, Article 1 of Indian constitution describes India as a ‘’Union of States.’’ This means India is a union comprising of various states which are an integral part of it. Here, the states cannot break away from the union. They do not have the power to secede from the union. In a true federation, the constituting units or the states have the freedom to come out of the 157 CU IDOL SELF LEARNING MATERIAL (SLM)

union. India is not a true federal government because it combines features of a federal government and the features of unitary government which can also be called as a quasi-federal government. Federal Features of Indian Constitution 1. Two sets of Government There are 2 sets of government in India and that is union government and central government. Central government looks after the whole country and state government mainly works for the states. Working of both governments are different. 2. Division of Powers Powers between central government and state government have been divided by Constitution of India. The seventh schedule of the Indian constitution provides how the division of powers is made between state and central government. Both central and state governments have separate power and responsibilities. The 7th schedule of Indian constitution consists of union list, state list, and concurrent list. Union list It contains all the matters on which only central government can make laws. State list It contains all the matters on which state government can make laws. Concurrent list It contains all the matters on which both central and state government can make laws. Written Constitution India has the one of the largest constitutions in the world which consist of 395 articles 22 parts and 12 schedules. Every article of Indian constitution is clearly written down and has been discussed in full detail. Supremacy of the Constitution The Constitution of India is regarded as supreme law of land. No law can be made or passed 158 CU IDOL SELF LEARNING MATERIAL (SLM)

against the constitution of India. The Constitution of India is above all citizens and organizations of the country. Supreme judiciary The Supreme Court of India is regarded as the superior court of the country. The decision of the Supreme Court is binding upon all courts and it has the power to interpret the articles of the constitution. Bicameral-legislation In India, the legislature is bicameral. It has two houses and that are Lok Sabha and Rajya Sabha. The upper house of the parliament which represents the states is Rajya Sabha and the lower house of the parliament which represents the people in general is Lok Sabha. The constitution of India consists of federalism features such as division of power, supreme judiciary, two set of government, bicameral-legislation etc which clearly shows its Federal nature. The division of power between state and central government shows the federal nature of the India and supremacy of judiciary shows the absolute power of the supreme court that its decision is supreme and binding upon all courts. However, the powers given to the central government have more weight in comparison to the state government. How GST undermines the federal structure of the Constitution? The GST authorities have included all the indirect taxes under a single taxation regime. However, taxation is a sovereign function and is divided into 2 main parts collection and imposition. As per GST, union collects the tax but will be redistributed to the states as per the recommendations of the council. The federal feature of Indian constitution states that there must be distribution of powers between central and state government. Article 246 of constitution gives power to both union and state government to make laws in the respective matters provided in the union list, state list and concurrent list. But GST have taken away the freedom of individual states to levy taxes as per its own need and customer-oriented tax, therefore it results the states with higher production will lose taxes. Example of Federalism in respect of GST and Taxes on Alcohol, Petrol, and Diesel As per schedule 7 of Indian constitution the power to make laws and impose taxes divided between central and state government. Under GST both center and state governments have been given up taxation powers and as a 159 CU IDOL SELF LEARNING MATERIAL (SLM)

result following taxes have been eliminated. • Central Taxes that would fall under the ambit of GST are • Central Excise duty • Duties of Excise (Medicinal and Toilet Preparations) • Additional Duties of Excise (Goods of Special Importance) • Additional Duties of Excise (Textiles and Textile Products) • Additional Duties of Customs (commonly known as CVD) • Special Additional Duty of Customs (SAD) • Service Tax • Central Surcharges and Cesses so far as they relate to the supply of goods and services. State Taxes that would fall under the ambit of GST are • State VAT • Central Sales Tax • Luxury Tax • Entry Tax (all forms) • Entertainment and Amusement Tax (except when levied by the local bodies) • Taxes on advertisements g. Purchase Tax • Taxes on lotteries, betting, and gambling • State Surcharges and Cesses so far as they relate to the supply of goods and services. • Taxes on Alcohol, Petrol, and Diesel The central government has decided to keep alcohol, petrol, and diesel out of the GST and state government has retained the power to tax sale of petroleum products and potable liquor with themselves. Both state and central government charge taxes on alcohol, petrol, and diesel. However, taxes on alcohol, petrol, and diesel varies state to state there are no fixed tax charges on alcohol, petrol, and diesel. 160 CU IDOL SELF LEARNING MATERIAL (SLM)

Non-Federal Features of Indian Constitution Division of power is not equal In India central government has been given more powers than state government. Usually in federal government powers are divided equally between the two government. Single Constitution Another non-federal feature of Indian constitution is that it only has single constitution. There are no separate constitutions for the states in India and it is applicable to both the union as a whole and the states. In a true federal system there are separate constitutions for the state and union. The constitution is not strictly rigid Another non-federal feature of Indian constitution is that it can be amended by the Indian parliament. Parliament on many subject matters does not need the approval of the state legislature to amend the constitution. However, in true federal government both state and central government take part in the amendment of the constitution with respect to all matters. Therefore, those constitutions are rigid and not easy to amend. Central control over states Another non-federal feature of Indian constitution is that central government has control over state government. This means that any law made by the central government has to be followed by the state government and the state government cannot interfere in the matters of central government. Single Citizenship In India citizens only have single citizenship of the whole country. But in true federal government, citizens are allotted dual citizenship. First, they are the citizens of their respective provinces or states and then they are the citizens of their country. 6 Parliament does not represent the states equally In India the upper house (Rajya Sabha) and lower house (Lok Sabha) do not have equal representation in states. The state which is more populous have more representatives in the Rajya Sabha than the state which is less populous. But, in a true federal government the upper house of the legislature has equal representation from the constituting states. 161 CU IDOL SELF LEARNING MATERIAL (SLM)

Unified judiciary The Indian judicial system is unified or integrated and supreme court of India is regarded as the highest court of justice in the country. High courts and all other subordinate courts are under the supervision of the supreme court. Proclamation of emergency President of India has been given emergency powers by the constitution of India. However, he can execute such powers and declare emergency in the country under three conditions. Once emergency is declared by the president the central government become dominant and the state governments come under the total control of it. The state governments lose their liberty and this is against the principles of a federal government. What makes India Quasi-Federal? There are many examples which clearly shows that the Indian constitution has federal features but it also shows that it has been evident with quasi-federal features too. Some of the examples which show that India is a quasi-federal are followed as- – Division of power between the central and state government but the central government has been given more power than the state government. – Parliament can override the laws which are passed by the states for the reason of national interest. – Residual powers are vested with the central government. – Major taxation powers are also vested with the central government. – Parliament does not represent the states equally, however, in a pure federal government the upper house of the legislature has equal representation from the constituting states. But in our Rajya Sabha, the states do not have equal representation. The populous state has more representatives in the Rajya Sabha that the less populous states. – In India, citizens are allotted single citizenship which is not a feature of pure federal government. As in true federal nation, citizens are allotted dual citizenship. First, they are the citizens of their provinces then they are the citizens of their nation. 162 CU IDOL SELF LEARNING MATERIAL (SLM)

Constitutional Debate on Federalism Dr. Ambedkar listed several features of the draft constitution which mitigated the rigidity and legalism of federalism in his historic speech in the constituent assembly in November 1949. The following features are follows as: Article 246 of Indian constitution distributes legislative power between union and states. It gives union exclusive power to legislate in respect of matters contained in list 1 and concurrent power to legislate in respect of matters contained in list 3 of schedule 7 of the constitution. Parliament is given power to legislate on exclusively state subjects matters namely: Article 249 of Indian constitution gives power to parliament with respect to matter in the state list in the national interest. Article 250 of Indian constitution gives power to parliament in respect of any matter in the state list if a proclamation of emergency is in operation. Article 252 of Indian constitution gives power to parliament to legislate two or more states by consent of those states. Article 352 and 353 states about provisions for the proclamation of emergency and the effect of such proclamation. There are provisions included in the constitution which are to be operative unless parliament made any contrary provision or word to the same effect. Article 368 of Indian constitution states about provisions regarding the amendment of the constitution. Dr Ambedkar made it clear that the provisions make the Indian constitution both unitary as well as federal according to the requirements of time and circumstances. He further stated that in normal times it is framed to work as a federal system. But in times of war it is designed as to make it as though it was a unitary system. He also made it clear that Article 250, 352, 353 of Indian constitution can only be exercise by the President of India and requires the approval of both houses of the Indian parliament. Important Cases 163 CU IDOL SELF LEARNING MATERIAL (SLM)

State of Rajasthan v Union of India, 1977 In State of Rajasthan v Union of India, 1977 former chief justice Beg, called the constitution of India as “amphibian” he further stated that if our constitution creates a central government which is amphibian in the sense that it can be either federal or unitary according to the need of the situation and the circumstance of the case. 2. S.R. Bommai v Union of India In this case the court stated that the president should exercise his powers only after his proclamation is approved by both houses of parliament. The power of president to dismiss a state government is not absolute. 3. Haryana v State of Punjab In State of Haryana v State of Punjab, the term semi-federal was used for India and in Shamsher Singh v State of Punjab the constitution was called more unitary than federal. 4. State of West Bengal v Union of India [4] This case dealt with the issue of the exercise of sovereign powers by Indian states. In this case, the Supreme Court held that the Indian constitution does not promote a principle of absolute federalism. The court further states 4 characteristics highlighting the facts that the Indian constitution is not a traditional federal constitution. The first characteristic is highlighted by the court is that constitution of India is the supreme document which governs all states and there is no provision of separate constitutions for each state as required in the federal state. The second characteristic is highlighted by the court is that the states have no power to alter the constitution but only central government has the power to alter the constitution of India. The third characteristic is highlighted by the court is that the Indian constitution renders supreme power upon the courts to invalidate any action which violates the constitution. The fourth characteristic is highlighted by the court is that the distribution of powers facilitates national policies matter by central government and local governance by the state government. The Supreme Court further held that the central government is the final authority for any issue. The political power distributed between both union and state government with greater weight given to union government. Another thing which is against the pure form of federalism is there is concept of single citizenship in India. The learned judges finally concluded that the structure of India as provided by the constitution is centralized, with the states occupying a secondary position vis-à-vis the Centre. The Indian 164 CU IDOL SELF LEARNING MATERIAL (SLM)

government is quasi-federal in nature as it contains features of single citizenship, a single constitution, and flexibility of constitution which are not the features of a pure federal government which is only followed in the United States of America. Although the Indian government contains features of Federal government such as division of power, partly rigidity of constitution it does not consider as pure federal government but as quasi-federal government. 7.3.2 Territories of the States It is said that the USA is an 'indestructible union of indestructible states'. It means that the states of the USA cannot be split, merged or altered in size: but they will not leave the union. But in India boundaries of States can be altered by a law enacted by parliament. It is in this context that in India territorial reorganisation has been going on till the year 2000 and further reorganisations are possible. In the year 2000 the number the number of states stands at 28, the number of Union territories at seven. According to Article 3 of the Constitution of India, Parliament has power to separate territories from states and Union territories to create new states or Union territories, to merge two or more states Orland Union territories, split a state or a Union territory into two or more states Orland Union territories and to unite parts of states and Union territories to create new states or Union territories. The views of the concerned state legislatures will have to be taken beforehand but not necessarily respected. 7.3.3 Structure of Government. The Union and states have separate governments, both based on parliamentary systems. Like President at the Centre, the Institution head of government at State level is Governor. However, although the President is elected indirectly by the people, the Governors of the states are appointed by the President (i.e., the Union Government). Both the President and the Governors are advised by their Councils of Ministers. But there is no strict division of public services in India. The Union and the state officials administer both the Union and state laws simultaneously. There are state civil services. But there are also All-India Services whose members serve both the Union and the state government. The Indian judiciary is, however, integrated. It is headed by the Supreme Court of India, which is also the federal court. 7.3.4 Division of Powers The Indian Constitution lays down an elaborate division of legislative powers between the 165 CU IDOL SELF LEARNING MATERIAL (SLM)

Union and state government in the Seventh Schedule. The executive powers of the Union and state governments co-exist with their legislative powers. The powers of the Union and state governments are enlisted in three lists known as: The Union list, the State list and the Concurrent list. In List 1, the Union List, the powers of the Union government are mentioned; it contains 97 subjects; in List 11, the State List, 61 subjects are mentioned on which State legislatures will enact laws. In List 111, the concurrent Lists are mentioned the powers that are to be concurrently exercised by the Union and the state government’s aid 47 subjects are mentioned in this. The residual powers, not mentioned in any of these lists, belong to the Union. There are, however, three conditions attached to this division: I) If on a concurrent list subject, the Union and a state's laws conflict, the Union law will prevail. 2) If the Council of States, or Rajya Sabha by a majority of two-thirds of its members, decide by a resolution that a certain subject belonging to the state list is of national importance the Parliament will be able to legislate on it. 3) When a proclamation of emergency is in operation the Parliament may legislate on any of the state subject. The force of such law will lapse six months after the proclamation ceases to operate. Broadly speaking, all subjects relating to defence, security, external affairs, communication, currency, banking and insurance, inter-state river and river valleys, inter-state trade and commerce, major industries. Development and regulation of oilfields and mines declared by Parliament necessary to be controlled by it, census and universities and other institutions declared by Parliament to be of national importance are under the Union's control. Public order, police, prisons, local communication, land, agriculture, public health, local government, mines not under the Union's control, intoxicating liquor and betting and gambling are under the state's control. The concurrent jurisdiction of the Union and the state extend to criminal law and criminal procedure, preventive detention, education, forests, inland shipping and navigation, factories, boilers, electricity, newspapers, books and printing presses, weights and measures and price control. 7.5 RELATIONS WITH UNION STATE A federal state has often been described as a union without unity: meaning that there is division of power along with cooperation between the partners. This cooperation has been sought to be established by the Constitution in different ways: 166 CU IDOL SELF LEARNING MATERIAL (SLM)

1. In the first place there is a directive of the Constitution that the states should legislate on subjects belonging to their jurisdiction and the Union can legislate on subjects belonging to its jurisdiction. But, as we have seen, Parliament may Legislate on state subjects in some special cases. 2. The Governors, on the other hand, have been given the power to withhold assent to a bill and reserve it for the President's assent. The matter becomes complicated due to the fact that the Governors are appointed by the President and hold office during the pleasure of the President (i.e., the Union government). 3. The Parliament delegate power to legislate on any Union subject to a state legislature. Two or more states may also delegate the power to legislate on any of the state subjects. But this can be done only if these states request the Rajya Sabha (the. Council of States) to pass a resolution empowering the parliament to legislate on the matters in the state list. Even without the request of the two or more states, the Parliament can legislate on the state issue, if two third members present in Rajya Sabha pass resolution to this effect. 4. The states have been directed to exercise their executive power in compliance with the laws of the Parliament and any existing law in operation on the state. The Union has executive power to issue directions to the state to ensure such compliance. 5. The Union has the power to issue directives to the state to exercise their executive power without prejudicing the executive power of the Union and the Union can issue directions to ensure this restriction. 6. The Union has power to protect the states from external aggression and internal disturbance 7. The failure of a state to give effect to any of the directives may lead to a declaration of constitutional breakdown in a state. These generally healthy provisions, it should be noted, have sometimes been misused to the detriment to state autonomy. 7.4.1 The Financial Powers of the Union and the States Like the legislative and the executive powers financial powers are divided between the Union and the states in such a detailed and complicated way that most commentators on the Indian federal system have chosen to use the phrase 'financial relations' rather than 'division of financial power'. This is mainly due to two reasons. Politically speaking the revenues of 167 CU IDOL SELF LEARNING MATERIAL (SLM)

the Union are far greater than the revenues of the states making the states dependent on federal subsidies. Constitutionally, on the other hand, the Indian Constitution makes a distinction between the power to levy taxes and the power to appropriate them. There is no concurrent jurisdiction in the matter of taxation. Further, the division of financial powers has been subjected to four amendments: the 3rd (in 1954), the 6th (in 1956), the 46th (in 1982) and the 80th (in 2000). These amendments have enhanced the Union's power to levy taxes but not necessarily to appropriate them. There are three kinds of taxes in the Constitution, as a result: 1) Taxes and duties collected and appropriated by the states. 2) Taxes and duties collected by the Union on behalf of the states and assigned to them. 3) Taxes and duties collected by the Union and distributed among the states according to principles laid down by the Parliament. Besides these taxes and duties the Union has unlimited power to give grants-in-aid to the states. The States impose land revenue, agricultural income tax, succession duties and estate duty on agricultural land, taxes on lands and buildings, taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development, excise duties on alcoholic liquors, opium, Indian hemp for non-medicinal purpose, taxes on entry of goods for consumption and sales, taxes on consumption and sale of electricity, sales tax on goods other than newspapers exchanged within the State, taxes on advertisements except those on newspapers, radio or television, taxes on goods transported by roads or inland water ways and vehicles on road, taxes on animals and boats, tolls, taxes on professions, trades, callings and employments, capitation taxes, taxes in luxuries, amusements, betting and gambling and fees in respect of any of the matters in the State List. The net proceeds of taxes and duties that the Union levies, after being distributed among the states as above, all loans received by the Union and all its receipts in repayment of loans form the Consolidated Fund of India. All revenues, loans and receipts in repayment of loans by a state government form the Consolidated Fund of the State. Such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union list are levied by the Union government but collected and appropriated by the states (Art. 268). Taxes on sale and purchase of goods other than newspapers and taxes on consignment of goods, where such sale or purchase or consignment takes place in course of inter-State trade and commerce, shall be levied and collected by the Union but assigned to the states according to the 168 CU IDOL SELF LEARNING MATERIAL (SLM)

principles of distribution formulated by the Parliament (Art. 269). The other taxes and duties allowed under the Union list-tax on non-agricultural incomes: customs including export duties, excise duty on tobacco and medicinal and toilet preparations containing alcohol, opium and narcotic drugs, corporation tax, taxes on capital value of non-agricultural assets of individuals and companies and capital of companies, estate and succession duties on property other than agricultural land, terminal taxes on goods or passengers carried by railways, sea or air, taxes on railway fares and freights, taxes other than stamp duties on transactions in stock exchanges and futures market - are levied and collected by the Union. A percentage of their proceeds will go to the Union government according to the order of the President (i.e., the Union Government) after considering the recommendations of the Finance Commission. The rest will be distributed amon3 the states according to the prescription of the President after considering the recommendations of the Finance Commission (Art. 270). This leaves the Union with the power to charge fees on any matter relating to the subjects in the Union list for its wholesale appropriation. Stamp duties other than duties and fees collected by means of judicial stamps and fees imposed on the subjects included in the Concurrent List but not including fees taken in any court are collected concurrently. Taxes on the residual subjects are exclusively under the Union's jurisdiction. At the same time, the property of the Union and the purchase and storage of water and electricity by the Union are free from taxation of a state. The property and income of a state is, on the other hand, free from Union taxation. Any tax imposed by a state on a Union property before the commencement of the Constitution would continue to be collected by the state until the Parliament otherwise provides. Further, Parliament, by law, may provide for imposition of tax on a trade or business carried on by a state. There is a special provision for grant in lieu of export of jute to the states of Assam, Bihar, Orissa and West Bengal (Article 273). All other grants-in-aid are governed by Article 275. The Finance Commission Every five years the President appoints a Finance Commission. The Parliament by law determines the qualification required for appointment to the Commission (Art 280). The Commission recommends to the President: i) the distribution of the net proceeds of taxes between the Union aid the states and the allocation of shares of such state proceeds among the states: ii) the principles which should govern the grants-in-aid of the state’s revenues from the Consolidated Fund of India; and iii) the measures needed to augment the Consolidated Fund of a state to supplement the resources of the Panchayats in the states. The President causes the recommendations to be presented to the Parliament (Art. 28 I). It 169 CU IDOL SELF LEARNING MATERIAL (SLM)

should, however be noted that the recommendations are not mandatory. The President, that is: the Union government: is the final authority to decide on such recommendations. The Planning Commission and National Development Council unlike the Finance Commission. the Planning Commission is not a statutory body. It was set up by a formal resolution of the Union Cabinet in March 1950. The Planning commission plays an important role in the formulation of India's economic policies. The Prime Minister is the chairman of the Planning Commission. Some of the important members of the Planning Commission arc Union Council of Ministers, Cabinet Secretary and other distinguished persons. It is an extra - constitutional agency and works as an advisory body. It is responsible for the Five Year Plans of the country. The plans finalised by the Planning Commission are discussed by the National Development Council (NDC). It is the highest reviewing and advisory body in the field of planning. It was constituted in 1952. The member of the NDC arc Prime Minister, Chief Ministers of all states, members of Planning Commission and all Union cabinet ministers. It is an intermediary body between the Union, state and local Government. Five Year Plans become operational after the approval of the NDC. 7.5 THE UNION TERRITORIES The Union territories are small and special areas directly under the administrative control of the Union government. Many of the former Union territories have been promoted to the status of states. The President appoints an administrator for a Union territory, sometimes designated as Lieutenant-Governor. The President may also appoint the Governor of an adjacent state as the administrator of a Union territory. Such Governors while administering the Union territories, are not advised by the Council of Ministers of their own states. In 1962 Parliament created a legislature and a Council of Minister for sonic Union territories. All of them except Pondicherry have by now become states. In 1991 Delhi was given a special status as a Union capital territory. 7.8 SUMMARY • In political terms, Federalism is considered as a union without unity. • In India this union is the result of devolution of power from the central government to the state governments. 170 CU IDOL SELF LEARNING MATERIAL (SLM)

• The Constitution divides legislative, executive and financial powers between the Union and the states with a tilt towards the Union. • The Indian judiciary is integrated but the highest court is also the federal court of the country. • The state boundaries are not firm and there are occasional Union-state and center- state tensions. 7.9 KEYWORDS • Union: a society or association formed by people with a common interest or purpose. • NDC: National Development Council • Planning commission: The Planning Commission was an institution in the Government of India, which formulated India's Five-Year Plans, among other functions. • Hegemony: Domination or control by one country or state over a group of others especially if it is a member of that group. • Sarkaria Commission: This Commission on Centre-State Relations was formally constituted by the Government of India, Ministry of Home Affairs on June 9, 1983 under the chairmanship of R.S. Sarkaria (a retired judge of Supreme Court), Shri. B. Sivaraman and Dr. S.R. Sen were the other two members. The objective of the Commission was to examine the working of existing arrangements between the centre and the states and recommend such changes in the said arrangement as might be appropriate within the present constitutional framework. • Article 256: This provides 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 to be necessary for that purpose. • Article 257 : This Article of the Constitution relates to the power of the union to give directions to the state government's regarding exercise of executive power to 171 CU IDOL SELF LEARNING MATERIAL (SLM)

ensure • that the exercise of the executive power of the state does not interfere with the exercise of executive power of the union (257 (i)) • the construction and maintenance of means of communication of national or military importance by the state (257 (ii)) C) protection of railways within the state (257 (iii)) • Article 365: The Constitution stipulates that where any state has failed to comply with or to give effect to any directions given in the exercise of the executive power of the union under any of the provisions of the Constitution, it shall be lawful for the President to 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. 7.10 LEARNING ACTIVITY 1. Compile a list of union territories of India. __________________________________________________________________________ _____________________________________________________________________ 2. Discuss the nature of federation in India. __________________________________________________________________________ ___________________________________________________________________ 7.11 UNIT END QUESTIONS A. Descriptive Questions Short Answer 1. Who exercises the residual power in Indian federation'? 2. Why is India known as a \"Union of states\" rather than federation'? 3. Write a note on the Financial Powers of the Union and the States. 4. Describe the Finance commission? 172 CU IDOL SELF LEARNING MATERIAL (SLM)

5. Describe the relationship between the Planning Commission and the National Development Council? Long Answer 1. What are the 3 conditions attached to Division of powers? 2. How many types of taxes are there in the Constitution of India'? 3. Who appoints an administrator for a Union territory? 4. What are union territories? 5. When was Delhi given a special status as a Union capital territory? B. Multiple Choice Questions 1. Consider the following statements on the practice of federalism in India. Identify those which hold true for decentralisation after 1992. A. Local governments did not have any power or resources of their own. B. It became constitutionally mandatory to hold regular elections to local government bodies. C. The state governments are required to share some powers and revenue with local government bodies. D. No seats are reserved in the elected bodies for scheduled castes, scheduled tribes and other backward classes. a. B and C b. A and C c. A and D d. B and D 2. A third tier of government is called ………… government. 173 a. union b. judiciary CU IDOL SELF LEARNING MATERIAL (SLM)

c. local d. All of these 3. The political head of a Municipal Corporation is called the ………… a. captain b. mayor c. Sir d. All of these 4. The Union Government has the power to legislate on ………… subjects which do not fall in any of the three lists. a. Residuary b. Judiciary c. all d. None of these 5. The ………… Government alone can make laws relating to the subjects mentioned in the Union List. a. Union. b. Improving. C. Stagnant d. None of these Answer 1-a, 2-c, 3-b, 4-a, 5-a 174 CU IDOL SELF LEARNING MATERIAL (SLM)

7.12 REFERENCES • D. Basu, Introduction to the constitution of India. New Delhi, Prentice-Hall. • Economic Reforms: The Role of' States and the Future of centre-State. • New Delhi: Observer Research Foundation, 1996 Ian Copland and John Rickard (eds.), Federalism: Comparative perspectives ,from India and Australia, New Delhi, Manohar, 1999 Web resources • https://www.jagranjosh.com/general-knowledge • https://www.topperlearning.com • https://www.constitutionofindia.net › 175 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT – 8: CENTRE - STATE RELATIONS: LEGISLATIVE, EXECUTIVE AND FINANCIAL POWERS Structure 8.0 Learning Objectives 8.1 Introduction 8.2 Centre – state relations 8.3 centre state administrative relations 8.4 centre state financial relations 8.5 Summary 8.6 Keywords 8.7 Learning Activity 8.8 Unit End Questions 8.9 References 8.0 LEARNING OBJECTIVES After studying this unit, you should be able to • Get the basic idea on Public Finance Management & its importance. • Get to know various types of Expenditures. • Distinguish between Internal & External debts. • Fiscal Policy & its objectives. • Financial Administration. • Public Revenue.

• Pattern of Tax structure in India. 8.1 INTRODUCTION India is a union of states. The constitution of India has divided the legislative, executive and financial powers between the centre and the states, which gives the constitution a federal character whereas judiciary is integrated in a hierarchical structure. In India, before the formation of the federation the States were not ‘sovereign’ entities. As such, there was no need for safeguards to protect ‘States’. On account of the exigencies of the situation, the Indian federation has acquired characteristics which are quite different from the American model. 1. The residuary powers under the Indian Constitution are assigned to the Union and not to the States. However, it may be noted that the Canadian Constitution does the same mode of distributing the powers cannot be considered as eroding the federal nature of the Constitution. 2. Though there is a division of powers between the Union and the States, the Indian Constitution provides the Union with power to exercise control over the legislation as well as the administration of the States. Legislation by a State can be disallowed by the President, when reserved by the Governor for his consideration. 3. The Governor is appointed by the President of the Union and holds office “during his pleasure”. Again these ideas are found in the Canadian Constitution though not in the Constitution of the U.S.A. 4. The Constitution of India lays down the Constitution of the Union as well as the States, and no State, except Jammu and Kashmir, has a right to determine its own (State) Constitution. 5. When considering the amendment of the Constitution we find that except in a few specific matters affecting the federal structure, the States need not even be consulted in the matter of amendment of the Constitution. The bulk of the Constitution can be amended by a Bill in the Union Parliament being passed by a special majority. 6. In the case of the Indian Constitution, while the Union is indestructible, the States are not. It is possible for the Union Parliament to reorganise the States or to alter their 177 CU IDOL SELF LEARNING MATERIAL (SLM)

boundaries by a simple majority in the ordinary process of legislation. The ‘consent’ of the State Legislature concerned is not required; the President has only to ‘ascertain’ the views of the Legislatures of the affected States. The ease with which the federal organisation may be reshaped by an ordinary legislation by the Union Parliament has been demonstrated by the enactment of the States Reorganisation Act, 1956. A large number of new States have, since, been formed. 7. Under the Indian Constitution, there is no equality of representation of the States in the Council of States. Hence, the federal safeguard against the interests of the lesser States being overridden by the interests of the larger or more populated States is absent under our Constitution. Its federal nature is further affected by having a nominated element of twelve members against 238 representatives of the States and Union Territories Fig 8.1 Centre Relations 178 CU IDOL SELF LEARNING MATERIAL (SLM)

179 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 8.2 Centre-State Relations Union-State Relations / Centre-State Relations The Constitution provides a federal system of government in the country even though it describes India as ‘a Union of States’. The term implies that firstly, the Indian federation is not the result of an agreement between independent units and secondly, the units of Indian federation cannot leave the federation. India is a union of states. The constitution of India has divided the legislative, executive and financial powers between the centre and the states, which gives the constitution a federal character whereas judiciary is integrated in a hierarchical structure. Fig 8.3 Union-State Relations / Centre-State Relations 180 The centre-state relations are divided into three parts, which are mentioned below: (A) Legislative Relations (Article 245-255) (B) Administrative Relations (Article 256-263) (C) Financial Relations (Article 268-293) Legislative Relations CU IDOL SELF LEARNING MATERIAL (SLM)

Articles 245 to 255 in Part XI deals with different aspects of legislative relations between centre and states. These include: (1) Territorial jurisdiction of laws made by the Parliament and by the Legislatures of States. (2) Distribution of legislative subjects (3) Power of parliament to legislate with respect to a matter in the State List (4) Centre's control state legislation However, Seventh Schedule of the Constitution provides for the distribution of legislative powers between the centre and the states. The legislative subjects are divided into List I (the Union List), List II (the Concurrent List) and List III (the State List). At present, there are 100 subjects in the Union list which includes subjects such as foreign affairs, defense, railway, postal services, banking, atomic energy, communication, currency etc. At present, there are 61 subjects in the State list. The list includes subjects such as police, public order, roadways, health, agriculture, local government, drinking water facilities, sanitation etc. At present, there are 52 subjects in the concurrent list. The list includes subjects such as education, forests, protection of wild animals and birds, electricity, labour welfare, criminal law and procedure, civil procedure, population control and family planning, drugs etc. Article 245 empowers the centre to give directions to the states in certain cases in regards to the exercise of their executive powers. Article 249 empowers the parliament to legislate with respect to a matter in the State List in the national interest. Under Article 250, the parliament becomes empowered to make laws on the matters related to state list when national emergency (under Article 352) is in operation. Under Article 252, the parliament is empowered to legislate for two or more States by their consent. Administrative Relations Article 256 to 263 deals with the administrative relations between the centre and the states. 181 CU IDOL SELF LEARNING MATERIAL (SLM)

Article 256 states that \"the executive power of every State shall be so exercised as to ensure compliance with the laws made by the 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\". Fig 8.3 Administrative Relations Cooperation between the Centre and the States The constitution lays down various provisions to secure cooperation and coordination between the centre and the states. These include: (i) Article 261 states that \"Full faith and credit shall be given throughout the territory of India to public acts, records and judicial proceedings of the Union and of every State\". (ii) According to Article 262, the parliament may by law provide for the adjudication of 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. 182 CU IDOL SELF LEARNING MATERIAL (SLM)

(iii) Article 263 empowers the President to establish an inter-State Council to inquire into and advise upon disputes between states, to investigate and discuss subjects in which some or all of the States, or the Union and one or more of the States, have a common interest. (iv) As per Article 307, Parliament may by law appoint such authority as it considers appropriate for carrying out the purposes of the constitutional provisions related to the inter- state freedom of trade and commerce. Centre-State Relations during Emergency (i) During a national emergency (under Article 352), the state government become subordinate to the central government. All the executive functions of the state come under the control of the union government. (ii) During a state emergency (under Article 356), the president can assume to himself all or any of the functions of the Government of the State and all or any of the powers vested in or exercisable by the Governor or authority in the State other than the Legislature of the State. (iii) During the operation of financial emergency (under Article 360), the Union may give directions to any State to observe such canons of financial propriety as may be specified in the directions, and to the giving of such other directions as the President may deem necessary and adequate for the purpose. 183 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 8.4 Administrative Relations Financial Relations The Constitution deals with the centre-state financial relations in Article 268-293 of Part XII. Allocation of taxing powers The Constitution has provided the union government and the state governments with the independent sources of revenue. It allocates the powers to centre and the states in the following way: (i) The parliament has exclusive power to levy taxes on the subjects mentioned in the Union List. (ii) The state legislatures has exclusive power to levy taxes on the subjects mentioned in the State List (iii) Both the parliament and the state legislature are empowered to levy taxes on the 184 CU IDOL SELF LEARNING MATERIAL (SLM)

subjects mentioned in the Concurrent List. (iv) The parliament has exclusive power to levy taxes on the matters related to the residuary subjects. However, in case of tax revenue distribution, article 268 states that duties are levied by the Union but are collected and appropriated by the States; Service tax levied by Union and collected and appropriated by the Union and the States (Article 268-A); Taxes levied and collected by the Union but assigned to the States (Article 269); Taxes levied and collected by the Union but distributed between the Union and the States (Article 270). Surcharge on certain duties and taxes for purposes of the Union (Article 271) Under Article 275, the parliament is authorized to provide grants-in-aid to any state as parliament may determine to be in need of assistance, and different sums may be fixed for different States. Under Article 282, the union or a state may make any grants for any public purpose, notwithstanding that the purpose is not one with respect to which Parliament or the Legislature of the State, as the case may be, may make laws. Under Article 352, during the operation of national emergency, the distribution of revenues between the centre and the states can be altered by the president. Under Article 360, during the financial emergency, the executive authority of the Union shall give directions to any State to observe such canons of financial propriety as may be specified in the directions and to the give the directions as the President may deem necessary and adequate for the purpose. The important recommendations of the first administrative reforms commission related to the centre-state relations are: Establishment of an Inter-state council under Article 263 Decentralization of powers to the states as much as possible More transfer of financial resources to the states Arrangements for devolution in such a way that the states can fulfil their obligations Advancement of loans to states should be related to as ‘the productive 185 CU IDOL SELF LEARNING MATERIAL (SLM)

principle’. Deployment of central armed forces in the states either on their request or otherwise During state emergency, under Article 356, President's Rule can be imposed in event of the failure of constitutional machinery in a state. 8.2 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: 1. Legislative relations 2. Administrative relations 3. Financial relations 4. Centre State 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 186 CU IDOL SELF LEARNING MATERIAL (SLM)

in the list. These include foreign affairs, defense, 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) 187 CU IDOL SELF LEARNING MATERIAL (SLM)

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: 1. 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. 2. Bills on certain matters enumerated in the State List can be introduced in the state 188 CU IDOL SELF LEARNING MATERIAL (SLM)

legislature only with the previous sanction of the President as imposing restrictions on freedom of trade and commerce. 3. 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. 8.3 CENTRE STATE 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. Centre State Relations During Normal Ties 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 189 CU IDOL SELF LEARNING MATERIAL (SLM)

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 190 CU IDOL SELF LEARNING MATERIAL (SLM)

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. Centre State Relations during emergencies Fig 8.5 President’s Rule 1. Under President’s Rule: The State Governments cannot ignore the directions of the 191 CU IDOL SELF LEARNING MATERIAL (SLM)

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. 4. 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. 8.4 CENTRE STATE 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. 192 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 8.6 Centre State Financial Relations 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: 1. 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. Distribution of the tax-revenue 2. 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. 3. Service Tax are Levied by the Centre but Collected and Appropriated by the Centre and the States. 4. 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. 5. Taxes Levied and Collected by the Union and Distributed between Union and the 193 CU IDOL SELF LEARNING MATERIAL (SLM)

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. 6. 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: 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 Centre-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:- 194 CU IDOL SELF LEARNING MATERIAL (SLM)

i. To observe such canons of financial propriety as specified in the direction. ii. To reduce the salaries and allowances of all people serving in connection with the affairs of the State, including High Courts judges. iii. 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; 195 CU IDOL SELF LEARNING MATERIAL (SLM)

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. 8.5 SUMMARY • In India, the Centre-States relations constitute the core elements of the federalism. • The Central Government and State Government cooperate for the well-being and safety of the citizens of India. The work together in the field of environmental protection, terror control, family control and socio-economic planning. • The Indian constitution aim at reconciling the national unity while giving the power to maintain state to the State governments. It is true that the union has been assigned larger powers than the state governments, but this is a question of degree and not quality, since all the essential features of a federation are present in the Indian constitution. • It is often defined to be quasi-federal in nature. Thus, it can be safely said that Indian Constitution is primarily federal in nature even though it has unique features that enable it to assume unitary features upon the time of need. Federal but its spirit is unitary. 8.6 KEYWORDS • State List: It lists functions and powers with respect to which a state legislature has exclusive powers to make laws (List I1 of Seventh Schedule of the Constitution). It includes subjects like agriculture, law and order, public health etc • Terminal Tax: It is imposed on goods arriving in a city or town by rail. It is realised by the railways on behalf of the municipality on commission basis. • Union List: It contains the distribution of functions assigned to the Union and in respect of which the Parliament has the exclusive power to make laws. It includes subjects like defence, external affairs, railways etc. (List I in the Seventh Schedule of the Constitution). 196 CU IDOL SELF LEARNING MATERIAL (SLM)

• Quasi-federal: It means an intermediate form of state between a unitary state and a federation. It combines the features of a federal government and the features of a unitary government. 8.7 LEARNING ACTIVITY 1. Prepare a comprehensive note on role and functions of the Finance Commission based on information available on website, or newspapers. __________________________________________________________________________ __________________________________________________________________ 2. Prepare a note on Centre state administrative relations. __________________________________________________________________________ __________________________________________________________________ 8.8 UNIT END QUESTIONS A. Descriptive Questions Short Answer 1. What are the major sources of devolution of resources from the union to the Centre-state Financial Relations-11 states? 2. Point out the areas of conflict in federal finance between the centre and states. 3. What is legislative relation? 4. What are the Centre state relations? 5. Which state is in Centre of India? Long Answer 1. Broadly indicate the classification of taxes over which the union has legislative jurisdiction. 2. Describe the functions of the Finance Commission 197 CU IDOL SELF LEARNING MATERIAL (SLM)

3. Comment on the limitations of the functioning of the Finance Commission. What suggestions have been made by the Sarkaria Commission for improving the functioning of the Finance Commission? 4. State the broad functions of the Planning Commission. 5. What are the functions of the National Development Council? B. Multiple Choice Questions 1. In which year, the Government of India had set up the Sarkaria Commission on Centre-State relations? a. 1982 b. 1980 c. 1990 d. 1983 2. Constitution of India guarantees which of the following to the states of India? a. Territorial Integrity b. Sovereignty c. Right to secede from Union d. None of these 3. The Sarkaria commission is related to which of the following? 198 a. Centre and State Relations b. Banking & Financial Sector c. Elections Reforms CU IDOL SELF LEARNING MATERIAL (SLM)

d. Freedom of Press in India 4. Which schedule of the Indian Constitution divides the legislative powers between the Union and states? a. 6th schedule b. 7th schedule c. 8th schedule d. 9th schedule 5. In case of a conflict between directive principles and fundamental rights, which shall prevail? a. Fundamental rights b. DPSP c. supreme court will decide d. None of these Answer 1-d, 2-d, 3-a, 4-b, 5-a 8.9 REFERENCES • Bhargava, P.K. 1982. Centre-State Resource Transfers in India, Academic Press: Gurgaon. • Dewan Paras, 1981. Union States Fiscal Relations, Light and Life Publishers: New Delhi. Government of India, 1988. Report of the Commission on Centre-State Relations, General Manager: Nasik. 199 CU IDOL SELF LEARNING MATERIAL (SLM)

• Government of India, 1989. Report of the Ninth Finance Commission (Second Report), Manager of Publications, New Delhi* • Sinha R.K., 1987. Fiscal Federalism in India, Sterling: New Delhi. • Thimmaiah, G & H. Rao, 1986. Finance Commission and Centre-State Financial Relations, Ashish; New Delhi. • Thavaraj, M.J.K. 1978. Financial Administration of India, Sultan Chand & Sons: New Delhi. Web resources • https://www.jagranjosh.com/general-knowledge • https://www.topperlearning.com • https://www.constitutionofindia.net › 200 CU IDOL SELF LEARNING MATERIAL (SLM)