Why in news?

Over the course of the last few weeks, as we have found ourselves in the throes of a pandemic, one of the striking features of governance has been the signal role played by State Chief Ministers across India.

What did the Governments do?

  • 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.
  • These actions have not always been perfect. Some of them have even disproportionately trenched upon basic civil liberties.
  • But, by and large, they have been tailored to the reality faced on the ground by the respective governments.
  • States such as Maharashtra, Kerala, Tamil Nadu, Rajasthan, and Karnataka have shaped their policies to address their direct, local concerns. They have communicated these decisions to the public with clarity and consideration, helping, in the process, to lay out a broad framework for the nation.
  • In doing so, they have acted not merely as “laboratories of democracy”, to paraphrase the former U.S. Supreme Court Justice Louis Brandeis, but also as founts of reasoned authority.

Stifled by limitations

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 Specific Limitations:

  1. The inability of States to access funds and thereby structure their own welfare packages.
  2. The curbs imposed by a public finance management system that is mired in officialdom.
  3. 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.

Division of Powers- Federal Feature

  • There are varying accounts of what Indian federalism truly demands. But what is manifest from a reading of the Constitution is that it 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.
  • But the responsibilities vested with the States are no less important. Issues concerning public health and sanitation, agriculture, public order, and police, among other things, have each been assigned to State governments.
  • In these domains, the States’ power is plenary.
  • This federal architecture is fortified by a bicameral Parliament.
  • Significantly, this bicameralism is not achieved through a simple demarcation of two separate houses, but through a creation of two distinct chambers that choose their members differently: a House of the People [Lok Sabha] comprising directly elected representatives and a Council of States [Rajya Sabha] comprising members elected by the legislatures of the States.

Status Quo – Financially

  • 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.

Reality of the Status Quo, views on what the current government is doing?

  • The Supreme Court said in S.R. Bommai v. Union of India, that states are mere “appendages of the Centre”.
  • Time and again, efforts have been made to centralise financial and administrative power, to take away from the States their ability to act independently and freely.
  • Consider the widely hailed decision to accept the 14th Finance Commission’s recommendation for an increase in the share of the States in total tax revenues from 32% to 42%. While, in theory, this ought to have enabled the States to significantly increase their own spending, in reality this has not happened.
  • Gains made by the States, as the paper underlines, have been entirely offset by a simultaneous decline in share of grants and by a concomitant increase in the States’ own contribution towards expenditures on centrally sponsored schemes.
  • The creation of a Goods and Services Tax regime, which far from achieving its core purpose of uniformity has rendered nugatory the internal sovereignty vested in the States. By striking at the Constitution’s federal edifice, it has made the very survival of the States dependent on the grace of the Union.
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