Laxmikanth Summary: Centre - State Relations Notes | Study Indian Polity for UPSC CSE - UPSC

The Constitution of India, being federal in structure, divides all powers (legislative, executive and financial) between the Centre and the states. The Centre-state relations can be studied under three heads: 

• Legislative relations. 
• Administrative relations. 
• Financial relations.

LEGISLATIVE RELATIONS
Articles 245 to 255 in Part XI of the Constitution deal with the legislative relations between the Centre and the states. Besides these, there are some other articles dealing with the same subject.
Thus, there are four aspects in the Centre-states legislative relations, viz., 

1. Territorial Extent of Central and State Legislation
The Constitution defines the territorial limits of the legislative powers vested in the Centre and the states in the following way:
(i) The Parliament can make laws for the whole or any part of the territory of India.
(ii) A state legislature can make laws for the whole or any part of the state.
(iii) The Parliament alone can make ‘extra-territorial 1 egislation'. 

2. Distribution of Legislative Subjects
The Constitution provides for a three-fold distribution of legislative subjects between the Centre and the states, viz., List-I (the Union List), List-II (the State List) and List-Ill (the Concurrent List) in the Seventh Schedule:
I. The Parliament has exclusive powers to make laws with respect to any of the matters enumerated in the Union List. This list has at present 100 subjects (originally 971 subjects) like defence, banking, foreign affairs,currency, atomic energy, insurance, communication, inter-state trade and commerce, census, audit and so on.
II. The state legislature has “in normal circumstances” exclusive powers to make laws with respect to any of the matters enumerated in the State List. This has at present 61 subjects (originally 662 subjects) like public order, police, public health and sanitation, agriculture, prisons, local government, fisheries, markets, theaters, gambling and so on.
III. Both, the Parliament and state legislature can make laws with respect to any of the matters enumerated in the Concurrent List. This list has at present 52 subjects (originally 473 subjects) like criminal law and procedure, civil procedure, marriage and divorce, population control and family planning, electricity, labour welfare, economic and social planning, drugs, newspapers, books and printing press, and others. The 42nd Amendment Act of 1976 transferred five subjects to Concurrent List from State List, that is, (a) education, (b) forests, (c) weights and measures, (d) protection of wild animals and birds, and (e) administration of justice; constitution and organisation of all courts except the Supreme Court and the high courts. 

3. Parliamentary Legislation in the State Field 
When Rajya Sabha Passes a Resolution, During a National Emergency, When States Make a Request, To Implement International Agreements , During President's Rule. 

4. Centre’s Control Over State Legislation
The Constitution empowers the Centre to exercise control over the state's legislative matters in the following ways:
I. 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.
II. Bills on certain matters enumerated in the State List can be introduced in the state legislature only with the previous sanction of the president.
III. 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.

ADMINISTRATIVE RELATIONS
Articles 256 to 263 in Part XI of the Constitution deal with the administrative relations between the Centre and the states. In addition, there are various other articles pertaining to the same matter.

Distribution of Executive Powers
Thus, the executive power of the Centre extends to the whole of India:
I. to the matters on which the Parliament has exclusive power of legislation (i.e., the subjects enumerated in the Union List); and
II. to the exercise of rights, authority and jurisdiction conferred on it by any treaty or agreement.

Obligation of States and the Centre
The Constitution has placed two restrictions on the executive power of the states in order to give ample scope to the Centre for exercising its executive power in an unrestricted manner. Thus, the executive power of every state is to be exercised in such a way 

• as to ensure compliance with the laws made by the Parliament and any existing law which apply in the state; and 
• as not to impede or prejudice the exercise of executive power of the Centre in the state.

Centre’s Directions to the States 

I. the construction and maintenance of means of communication (declared to be of national or military importance) by the state;
II. the measures to be taken for the protection of the railways within the state;
III. the provision of adequate facilities for instruction in the mother-tongue at the primary stage of education
IV. the drawing up and execution of the specified schemes for the welfare of the Scheduled Tribes in the state.

Mutual Delegation of Functions 

Cooperation Between the Centre and States
The Constitution contains the following provisions to secure cooperation and coordination between the Centre and the states:
a. The Parliament can distribution and control of waters of any inter-state river and river valley.
b. The President can establish (under Article 263) an Inter-State Council to investigate and discuss subject of common interest between the Centre and the states..

All-India Services
Like in any other federation, the Centre and the states also have their separate public services called as the Central Services and the State Services respectively. In addition, there are all-India services IAS, IPS and IFS. The members of these services occupy top positions (or key posts) under both the Centre and the states and serve them by turns. But, they are recruited and trained by the Centre.

Integrated Judicial System
The Constitution, established an integrated judicial system with the Supreme Court at the top and the state high courts below it. This single system of courts enforces both the Central laws as well as the state laws. This is done to eliminate diversities in the remedial procedure.

During Emergencies 
I. During the operation of a national emergency (under Article 352), the Centre becomes entitled to give executive directions to a state on any’ matter.
II. When the President’s Rule is imposed in a state (under Article 356), the President can assume to himself the functions of the state government and powers vested in the Governor or any other executive authority in the state.
III. During the operation of a financial emergency (under Article 360), the Centre can direct the states to observe canons of financial propriety and the President can give other necessary directions including the reduction of salaries of persons serving in the state and the high court judges.

FINANCIAL RELATIONS
Articles 268 to 293 in Part XII of the Constitution deal with Centre-state financial relations.

Allocation of Taxing Powers
The Constitution divides the taxing powers between the Centre and the states in the following way:
The Parliament has exclusive power to levy taxes on subjects enumerated in the Union List, state, concurrent.

Distribution of Tax Revenues
The 80th Amendment of 2000 and the 88th Amendment of 2003 have introduced major changes in the scheme of the distribution of tax revenues between the centre and the states.
After these two Amendments, the present position in this regard is as follows:
A. Taxes Levied by the Centre but Collected and Appropriated by the States (Article 268):
B. Service Tax Levied by the Centre but Collected and Appropriated by the Centre and the States (Article 268-A):
C. Taxes Levied and Collected by the Centre but Assigned to the States (Article 269):
D. Taxes Levied and Collected by the Centre but Distributed between the Centre and the States (Article 270):
E. Surcharge on Certain Taxes and Duties for Purposes of the Centre (Article 271): The Parliament can at any time levy the surcharges on
F. Taxes Levied and Collected and Retained by the States.

Distribution of Non-tax Revenues 
A. The Centre The receipts from the following form the major sources of non-tax revenues of the Centre:
(i) posts and telegraphs;
(ii) railways;
(iii) banking;
(iv) broadcasting
(v) coinage and currency;
(vi) central public sector enterprises; and
(vii) escheat and lapse.

B. The States The receipts from the following form the major sources of non-tax revenues of the states:
(i) irrigation;
(ii) forests;
(iii) fisheries;
(iv) state public sector enterprise; and
(v) escheat and lapse.

Finance Commission 
Article 280 provides for a Finance Commission as a quasi-judicial body. It is constituted by the President every fifth year or even earlier. It is required to make recommendations to the President on the following matters: 

• The distribution of the net proceeds of taxes to be shared between the Centre and the states, and the allocation between the states, the respective shares of such proceeds. 
• The principles which should govern the grants-in-aid to the states by the Centre (i.e., out of the Consolidated Fund of India). 
• The measures needed to augment the Consolidated fund of a state to supplement the resources of the panchayats and the municipalities in the state on the basis of the recommendations made by the State Finance Commission.

Protection of the States’ Interest
To protect the interest of states in the financial matters, the Constitution lays down that the following bills can be introduced in the Parliament only on the recommendation of the President.

Borrowine by the Centre and the States
The Constitution makes the following provisions with regard to the borrowing powers of the Centre and the states:

• The Central government can borrow either within India or outside upon the security of the Consolidated Fund of India. 
• Similarly, a state government can borrow within India (and not abroad) upon the security of the Consolidated Fund of the State or can give guarantees, 
• The Central government can make loans to any state or give guarantees in respect of loans raised by any state. 
• A state cannot raise any loan without the consent of the Centre.

Inter-Governmental Tax Immunities 
Like any other federal Constitution, the Indian Constitution also contain the rule of immunity from mutual taxation' and makes the following provisions in this regard: 

• Exemption of Central Property from State Taxation 
• Exemption of State Property or Income from Central Taxation 

Administrative Reforms Commission: The Central government appointed a six-member Administrative Reforms Commission (ARC) in 1966 under the chairmanship oi Morarji Desai (followed by K Hanumanthayya).
It made 22 recommendations for improving the Centre-state relations. The important recommendations are:

• Establishment of an Inter-State Council under Article 263 of the Constitution. 
• Appointment of persons having long experience in public life and administration and non-partisan attitude as governors. 
• Delegation of powers to the maximum extent to the states. 
• Transferring of more financial resources to the states to reduce their dependency upon the Centre. 
• Deployment of Central armed forces in the states either on their request or otherwise.

Rajamannar Committee In 1969, 

• Tamil Nadu Government (DMK) appointed a three-member committee under the chairmanship of Dr P V Rajamannar to examine the entire question of Centre-state relations. 
• The committee submitted its report to the Tamil Nadu Government in 1971. The Committee identified the reasons for the prevailing unitary trends(tendencies of centralisation) in the country. They include:
  (i) certain provisions in the Constitution which confer special powers on the Centre;
  (ii) one-party rule both at the Centre and in the states;
  (iii) inadequacy of states’ fiscal resources and consequent dependence on the Centre for financial assistance; and
  (iv) the institution of Central planning and the role of the Planning Commission. 
• The important recommendations of the committee are as follows:
  (i) Anlnter-State Council should be set up immediately;
  (ii) Finance Commission should be made a permanent body;
  (iii) Planning Commission should be disbanded and its place should be taken by a statutory body;
  (iv) Articles 356, 357 and 365 (dealing with President's Rule) should be totally omitted;
  (v) The provision that the state ministry holds office during the pleasure of the governor should be omitted;
  (vi) Certain subjects of the Union List and the Concurrent List should be transferred to the State List;
  (vii) the residuary powers should be allocated to the states; and
  (viii) All-India services (IAS, IPS and IFS) should be abolished.

Anandpur Sahib Resolution In 1973
The Akali Dal adopted a resolution containing both political and religious demands in a meeting held at Anandpur Sahib in Punjab. The resolution, generally known as Anandpur Sahib Resolution, demanded that the Centre’s jurisdiction should be restricted only to defence, foreign affairs, communications, and currency and the entire residuary powers should be vested in the states. It stated that the Constitution should be made federal in the real sense and should ensure equal authority and representation to all the states at the Centre.

West Bengal Memorandum ln 1977
The West Bengal Government (led by the Communists) published a memorandum on Centre-state relations and sent to the Central government. The memorandum inter alia suggested the following:
(i) The word union' in the Constitution should be replaced by the word ‘federal;
(ii) The jurisdiction of the Centre should be confined to defence, foreign affairs, currency, communications and economic co-ordination;
(iii) All other subjects including the residuary should be vested in the states;
(iv) Articles 356 and 357 (President’s Rule) and 360 (financial emergency) should be repealed;
(v) State's consent should be made obligatory for formation of new states or reorganisation of existing states;
(vi) Of the total revenue raised by the Centre from all sources, 75 per cent should be allocated to the states;
(vii) Rajya Sabha should have equal powers with that of the Lok Sabha; and
(viii) There should be only Central and state services and the all-India services should be abolished.

Sarkaria Commission ln 1983 
The Central government appointed a three-member Commission on Centre-state relations under the chairmanship of R S Sarkaria, a retired judge of the Supreme Court.The final report was submitted in October 1987, and the summary was later officially released in January 1988.
The Commission made 247 recommendations to improve Centre-state relations. The important recommendations are mentioned below:
1. A permanent Inter-State Council called the Inter-Governmental Council should be set up under Article 263.
2. The institution of All-India Services should be further strengthened and some more such services should be created.
3. The residuary powers of taxation should continue to remain with the Parliament, while the other residuary powers should be placed in the Concurrent List.
4. When the president withholds his assent to the state bills, the reasons should be communicated to the state government.
5. The Centre should have powers to deploy its armed forces, even without the consent of states. However, it is desirable that the states should be consulted.
6. The Centre should consult the states before making a law on a subject of the Concurrent List.
7. The governor cannot dismiss the council of ministers so long as it commands a majority in the assembly.
8. The governor's term of five years in a state should not be disturbed except for some extremely compelling reasons.
9. No commission of enquiry should be set up against a state minister unless a demand is made by the Parliament.
10. Steps should be taken to uniformly implement the three language formula in its true spirit.
11. No change in the role of Rajya Sabha and Centre’s power to reorganise the states.
The most important is the establishment of the Inter-State Council in 1990.

Punchhi Commission
The Second commission on Centre-State Relations was set-up by the Government of India in April 2007 under the Chairmanship of Madan Mohan Punchhi, former Chief Justice of India. It was required to look into the issues of Centre-State relations keeping in view the sea-changes that have taken place in the polity and economy of India since the Sarkaria Commission had last looked at the issue of Centre-State relations over two decades ago. The terms of reference of the Commission were as follows:
I. The Commission was required to examine and review the working of the existing arrangements between the Union and States as per the Constitution of India,
II. In examining and reviewing the working of the existing arrangements between the Union and States and making recommendations as to the changes and measures needed, the Commission was required to keep in view the social and economic developments that have taken place over the years,
III. While examining and making its recommendations on the above, the Commission was required to have particular regard, but not limit its mandate to the following:
(a) The role, responsibility and jurisdiction of the Centre vis-a-vis States during major and prolonged outbreaks of communal violence, caste violence or any other social conflict leading to prolonged and escalated violence.
(b) The role, responsibility and jurisdiction oi' the Centre vis-a-vis States in the planning and implementation of the mega projects like the inter-linking of rivers,
(c) The role, responsibility and jurisdiction of the Centre vis-a-vis States in promoting effective devolution of powers and autonomy to Panchayati Raj Institutions and Local Bodies
(d) The role, responsibility and jurisdiction of the Centre vis-a-vis States in promoting the concept and practice of independent planning and budgeting at the District level.
(e) The role, responsibility and jurisdiction of the Centre vis-a-vis States in linking Central assistance of various kinds with the performance of the States.
(f) The role, responsibility and jurisdiction of the Centre in adopting approaches and policies based on positive discrimination in favour of backward States.
(g) The need and relevance of separate taxes on the production and on the sales of goods and services subsequent to the introduction of Value Added Tax regime.