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Federalism Notes | Study PSIR Optional for UPSC (Notes) - UPSC

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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.

Nature of a Federation

  • A federation is basically 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 union/ federation is possible only in a democratic framework. It also means that the extent of union is limited.
  • The contracting parties never surrender their complete authoritv/povver. Thus, when two or more sovereign states unite voluntarily, they retain their intemal/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 bom 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.

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, no where uses the term “federation “ or “federal union”. Both countries have dual polity - one for the Central / Union 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. An Indian citizen has only one citizenship -Indian. There 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 beer, 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 peittem 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.

  • A federal state is more effective than a unitary one when the size of its territory is as large as India.
  • A federal state is more effective than a unitan,' one when diverse groups of its population live in a discrete territorial concentration as in India.

The 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:

  • The Union and a state or a group of states:
  • One state and another state or a group of other states; and
  • One group of states and another group of states.

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 may 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 or/and Union territories, split a state or a Union territory into two or more states or/and 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.

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.

Division of Powers

  • The Indian Constitution lays down an elaborate division of legislative powers between the 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, die powers of the Union government are mentioned; it contains 97 subjects; in List II, the State List, 61 subject are mentioned on which State legislatures will enact laws. In List III, the concurrent List are mentioned the powers that are to be concurrently exercised by the Union and the state governments and 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:
    (a) If on a concurrent list subject the Union and a state's laws conflict, the Union law will prevail.
    (b) 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.
    (c) 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.

The Union-State Relations

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.

  • 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.
  • 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 by the fact that the Governors are appointed by the President and hold office during the pleasure of the President (i.e., the Union government).
  • The Parliament may 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.iv)    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.
  • 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.
  • The Union has power to protect the states from external aggression and internal
    disturbance.
  • 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.

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 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:
    (a) Taxes and duties collected and appropriated by the states.
    (b) Taxes and duties collected by the Union on behalf of the states and assigned to them.
    (c) 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 die 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 waterways 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 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 among 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:

  • The distribution of the net proceeds of taxes between the Union and the states and the allocation of shares of such state proceeds among the states:
  • The principles which should govern the grants-in-aid of the states revenues from the Consolidated Fund of India, and
  • 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. 281). It 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 are 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 are 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.

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 dieir own states.
  • In 1962 Parliament created a legislature and a Council of Minister for some 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 with a large autonomy.
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