Editorial Notes

[Editorial Notes] Needed, greater decentralisation of power

Recently, one of the striking features of governance has been the signal role played by State Chief Ministers across India. Even as States have taken up positions of leadership in the pandemic response, federal limitations are becoming hurdles.
By IASToppers
April 09, 2020

Contents

  • Introduction
  • Three limitations of state governments
  • Separation of powers between Centre and State
  • Measures taken to give more financial freedom to states
  • Conclusion

Needed, greater decentralisation of power

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Introduction

  • Even before the Union government invoked the Disaster Management Act, 2005, many State governments triggered the Epidemic Diseases Act, 1897, and installed a series of measures to combat what was then an oncoming onslaught of COVID-19.
  • Equally, though, as much as State governments have taken up positions of leadership, they have repeatedly found themselves throttled by the limitations of the extant federal arrangement.

Three limitations of state governments

i) Inability of States to access funds and thereby structure their own welfare packages.

ii) The curbs imposed by a public finance management system has prevented States from easily and swiftly making payments for the purchase of health-care apparatus such as ventilators and personal protective equipment.

iii) The colossal disruption of supply chains not only of essential goods and services but also of other systems of production and distribution, which has placed States in a position of grave economic uncertainty.

  • These limitations demonstrate an urgent need to decentralise administration, where States, and local bodies acting through such governments, are allowed greater managerial freedom.

Separation of powers between Centre and State

  • Constitution creates two distinct levels of government: one at the Centre and the other at each of the States. The Seventh Schedule to the Constitution divides responsibilities between these two layers.
  • The Union government is tasked with matters of national importance, such as foreign affairs, defence, and airways. Issues concerning public health and sanitation, agriculture, public order, and police, among other things, have each been assigned to State governments.
  • This federal architecture is fortified by a bicameral Parliament. Significantly, this bicameralism is achieved through creation of two distinct chambers that choose their members differently: a House of the People [Lok Sabha] and a Council of States [Rajya Sabha].
  • In formulating this scheme of equal partnership, the framers were also conscious of a need to make States financially autonomous. To that end, when they divided the power to tax between the two layers of government they took care to ensure that the authority of the Union and the States did not overlap.
  • Therefore, while the Centre, for example, was accorded the power to tax all income other than agricultural income and to levy indirect taxes in the form of customs and excise duties, the sole power to tax the sale of goods and the entry of goods into a State was vested in the State governments.
  • The underlying rationale was simple: States had to be guaranteed fiscal dominion to enable them to mould their policies according to the needs of their people.

Measures taken to give more financial freedom to states

  • 14th Finance Commission’s recommendation for an increase in the share of the States in total tax revenues from 32% to 42%.
  • However, gains made by the States have been entirely offset by a simultaneous decline in share of grants and by an increase in the States’ own contribution towards expenditures on centrally sponsored schemes.
  • Also, the creation of a Goods and Services Tax regime has made the very survival of the States dependent on the grace of the Union.
  • The tension today is so palpable that a number of States are reported to have written to the Finance Ministry highlighting that more than four months’ worth of Goods and Services Tax compensation to the States  (₹40,000 crore) remains unreleased.

Conclusion

It is invariably at the level of the States that real development has fructified, but the Union has repeatedly displayed a desire to treat States, as the Supreme Court said in S.R. Bommai v. Union of India, as mere “appendages of the Centre”.

But perhaps a crisis of the kind that COVID-19 show us that administration through a single central executive unit is unsuited to its diverse and heterogeneous polity.

We cannot continue to regard the intricate niceties of our federal structure as a nettlesome trifle. In seeing it thus, we are reducing the promise of Article 1 of the Constitution.

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