4. Issues in federal structure (F) · ISSUES IN FEDERAL STRUCTURE CHRONICLE IAS ACADEMY ... Doctrine of Pith and Substance: This doctrine was developed by the Privy Council to resolve

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ISSUES IN FEDERALISSUES IN FEDERALISSUES IN FEDERALISSUES IN FEDERALISSUES IN FEDERAL

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ISSUES IN FEDERALSTRUCTURE

CHRONICLEIAS ACADEMYA CIVIL SERVICES CHRONICLE INITIATIVE

The basic structure of government being federalin India, there are two sets of government viz. theUnion and the State Governments which derivetheir powers directly from the Constitution. Boththese governments enjoy coordinate powers andare not inferior to each other in a federal polity.Both of them enjoy independent authority derivedfrom the Constitution which divides legislative,executive and financial powers between them. In afederation, usually the judicial powers are alsodivided on federal lines but this is not so in Indiawhich has a common judiciary for both the Unionand the States. However, the division of powersbetween the two units of governments is not onthe lines of watertight compartments. There are anumber of areas where the two partners offederalism come together and cooperate with eachother. This is known as Cooperative Federalism. InIndia such cooperation takes place between theUnion and the States in constitutional bodies likeInter-State Council as well as extra constitutionalbodies like National Development Council, ZonalCouncils, etc. A notable feature of the distributionof powers under the Indian Constitution is theobvious dominance of the States in all the threespheres: legislative, executive and financial. Theframers of the Constitution deliberately wanted toprovide for a strong Centre in order to insure India'sterritorial integrity which explains the strongerposition of the Central vis-à-vis the States.

LEGISLATIVE RELATIONS

Basic Postulates of Distribution of LegislativePowers

The legislative powers between the Union andthe States are in a federal constitution are dividedon the following two lines:

(a) The territory over which the Union and thestates will exercise authority and

(b) The subjects to which their authority willextend.

Art. 245 defines the territorial limits of the

legislative powers vested in the Union and theStates. Article 246 defines the powers of theParliament and the legislatures of states with regardto the subject matter or topics of legislation.

Under Art. 245, Parliament may make laws forthe whole or any part of the Territory of India. Thelegislature of a state may enact laws for the wholeor any part of the state. However, only Parliamenthas the power of making laws having extraterritorial jurisdiction. The state legislatures do nothave any such powers.

Distribution of Subjects: Article 245 distributesthe legislative power between the Union and theStates with reference to the territory. Article 246divides the subject matter of legislation. It hasenumerated three lists: (a) Union List (List I) (b)State List (List II) and (c) Concurrent List (List III).These three Lists cover the subjects on which theUnion and State legislatures can make laws.

The Union List contains 100 entries. Theseentries include subjects of national importance e.g.Defence of India, Armed Forces of the Union,Foreign Affairs, War and peace, Railway, Airways,Post and Telegraphs, Telephones, Currency andcoinage, Reserve Bank of India, etc.

The State List contains 61 entries. The listcomprises of topics over which the state hasexclusive power to legislate. These include PublicOrder, Police, Local Government, Agriculture,Prisons, etc.

The Concurrent List contains 52 entries. BothUnion and the States are competent to make lawsin relation to these entries. But the Union has theupper hand on this List also.

In exercise of this residuary power, theParliament enacted the Gift-tax Act, The Wealthtax Act and some other Acts. Entry 97 of List Igives effect to Art. 248.

Doctrine of Pith and Substance: This doctrinewas developed by the Privy Council to resolve adispute relating to the subject matter of a law.According to this doctrine if a question arises

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whether a particular law relates to a particularsubject mentioned in one list or another the courtlooks to the substance of the matter. If the substancefalls within the Union List, then the incidentalencroachment by the law on the State List does notmake it invalid.

Doctrine of Colourable Legislation: Colourablelegislation is an attempt of a legislature to make alegislation appear to belong to its jurisdictionwhereas, in reality, it belongs to another legislature.When a legislature directly legislates on a topicreserved for another legislature in a disguisedmanner it is called colourable legislation. Underthis doctrine what cannot be done directly cannotbe done indirectly either. Such a law will bedeclared invalid by the courts under this doctrine.

Doctrine of Severability: If a law is inconsistentwith any fundamental rights or any other provisionof the Constitution, it is declared void by the courts.But only those parts of the Act which are ultravires or offend against the Constitution are declaredinvalid. The rest remains valid and operative. Inother words, the entire law need not be declaredanfractuous. Only the offending part is severed.

Power of Parliament to provide forestablishment of additional courts (Art. 247): ThisArticle empowers parliament to establish additionalcourts for the better administration of laws madeby Parliament. By 42nd Amendment Act, 1976entry 11A in the Concurrent List empowersParliament to constitute courts with respect toadministration of justice, constitution andorganization of all courts except the Supreme Courtand High Courts.

Residuary Powers of Legislation (Art. 248):There is no uniform pattern among federalconstitutions as to residuary powers. ResiduaryPowers are those powers which are not covered inthe Union, State and Concurrent Lists. In USA andAustralia, the residuary powers are vested in theStates but in Canada they belong to the Centre. InIndia also, the residuary powers are vested in theCentre. Gift Tax Act, 1958 was enacted under theresiduary powers of Parliament.

Legislative powers of Parliament on the StateList: There are certain provisions of the Constitutionunder which Parliament is competent to make lawson the State List in extra-ordinary situations. Theseprovisions are given below:

(a) By a Resolution of Rajya Sabha (Art. 249): IfRajya Sabha passes a resolution by a 2/3rdmajority then Parliament becomes competent

to make laws on the State List in the nationalinterest. The resolution remains in force for suchperiod not exceeding one year as may bespecified. Such laws are valid for only 1 yearat a time. However, Rajya Sabha may againpass the same resolution.

(b) During Emergency (Art. 250): If Emergencyhas been proclaimed under Art. 352, Parliamentis competent to legislate on the State List.However, such laws will cease to operate beyondsix months of termination of Emergency.

Thus, under Arts. 249 and 250, Parliament caninvade the State List. It may be so that a law passedby Parliament on the State List under the authorityof Arts. 249 to 250 comes into conflict with a lawpassed by state legislature. In case of such conflictthe law passed by Parliament shall prevail (Art.251).

(c) By mutual consent between two or moreStates (Art. 252): Under Art. 252 two or morestates may pass resolutions requestingParliament to make laws on the State List. Otherstates may also adopt this law by resolution.

To Implement International Treaties (Art.253): Under Art. 253, Parliament has the power tomake law for implementing any treaty, agreementor convention with any other country or anydecision made at any international conference orbody even if it encroaches on the State List. Forexample, legislation relating to TRIPS has beenenacted by Parliament to give effect to India's treatyobligations with WTO.

Inconsistency between a Parliamentary Lawand laws made by State Legislature (Art. 254):The Constitution authorizes both Parliament andthe state legislatures to legislate on the subjectsincluded in the Concurrent List. If there is a conflictbetween a Central and State law made on theConcurrent List, it is the Central law made byParliament that will prevail.

Validity of Acts requiring previous sanctionof the President or Governor (Art. 255): There arecertain bills which require previous sanctions ofthe President or the Governor before they can beintroduced in the Parliament or state legislature.For example, the Financial Bills under Art. 117(Parliament) and Art. 207 (State Legislature) cannotbe introduced without obtaining previousrecommendation of the President and the Governorrespectively. Similarly, a Bill relating to restrictions

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on freedom of Trade and Commerce (Art. 304)cannot be introduced in the state legislature withoutthe previous sanction of the President. But even ifthe assent by the President or the Governor as thecase may be was given after the Act was passed,it will be valid under Art. 255.

ADMINISTRATIVE RELATIONS

Power of the Union to give directions to theStates: The Union has the power to give directionsto the states under Arts. 256 and 257. This is toensure that a state government does not interferewith the legislative and administrative policies ofthe Union.

(a) Art. 256: This Article lays down that it shallbe the duty of the State to exercise its executivepower in such a manner as to ensurecompliance with the laws made by theParliament and any existing laws which applyin that State, and the executive power of theUnion shall extend to the giving of suchdirections to a State as may appear to theGovernment of India to be necessary for thatpurpose.(b) Art. 257: Under this Article, the Union canissue the following directions to the States:

I. To issue directions to the states to exercise theirpowers in such a manner that they do notobstruct the exercise of the executive power ofthe Union (Art. 257, CI. I)

II. To ensure construction and maintenance ofmeans of communications of nationalimportance including national highways andwaterways (CI.II).

III. To ensure protection of Railways (CI. III).

Art. 257 (4) provides that if additional costs areincurred in following the directions given underClauses 2 & 3 of Art. 257, the Union shall pay theincurred amount.

Flexibility in Executive Relations: Under theArt. 258, the Union may with the consent of thestate entrust function to the state in regard to anymatter to which the power of the Union extends.Similarly the state may with the consent of theUnion entrust function to the Union (Art. 258A).This may be with or without conditions.

Jurisdiction of the Union over territoriesoutside India (Art. 260): This Article enables theUnion to assume jurisdiction over territoriesacquired by the Government of India by treaty oragreement.

Public Acts, Records and Judicial Proceedings(Art. 261): This Article is also known as the Articleof full faith and credit. Under it, full faith andcredit shall be given throughout India to publicActs and judicial proceedings of the Union and ofevery state. The final judgement or orders deliveredor passed by civil courts in any part of the countrycan be executed anywhere in the country.

Adjudication of Water Disputes relating tointer-state rivers (Art. 262): This Article empowersthe Parliament to enact laws in order to providefor the adjudication of disputes relating to waterof inter-state rivers or river valleys. Accordingly,the Parliament has enacted the Water Disputes Act,1956 which empowers the Central Government toset up a tribunal to resolve water disputes. Thedecision of the tribunal shall be binding on theparties. The Act excludes the jurisdiction ofSupreme Court and other courts in respect of anywater disputes which has been referred to such atribunal. Recently the Cauvery River Tribunal hasgiven its final judgement on sharing of waters ofthe river Cauvery.

FINANCIAL RELATIONS

Distribution of financial resources between theUnion and the States is a prime feature of a federalconstitution. Without financial independence, thevarious constituents of a federation cannot enjoythe autonomy and cannot fulfil their obligationsunder the Constitution. The Constitution itself forthe purpose of clarity has divided the financialresources between the Centre and the State whichincludes distribution of the taxes and non taxrevenues, the power of borrowing and grants-in-aid.

The financial distribution of powers betweenthe Union and the States has the following features:

(a) Both the Union and the States have been givenexclusive powers of taxation.

(b) Some taxes are levied by the Union but collectedand appropriated by the States.

(c) Some taxes are levied and collected by theUnion but the proceeds are distributed to theStates.

(d) Some taxes are central taxes but are sharedbetween the Union and the States.

(e) The Union can make grants-in-aid to assist theStates.

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(f) Both the Union and the States have the powerof borrowing.

(A) Taxes belonging to the Union exclusively:

(1) Customs, (2) Corporation tax, (3) Taxes oncapital value of assets of Individual and Companies,(4) Surcharge on income tax, etc. (5) Fees in respectof matters in the Unions List (List I)

(B) Taxes belonging to the State exclusively:

(1) Land Revenue, (2) Stamp duty except indocument included in the Union List, (3) Successionduty, Estate duty and income tax on agriculturalland (4) Taxes on passengers and goods carried oninland waterways, (5) Taxes on lands and buildings,mineral rights, (6) Taxes on animals and boats, onroad vehicles, on advertisements, on consumptionof electricity, on luxuries and amusements, etc. (7)Taxes on entry of goods into local areas, (8) SalesTaxes on Professions, trades, etc., not exceedingRs. 2,500 per annum (List II).

(C) Duties Levied by the Union but Collectedand Appropriated by the States:

Stamp duties on bill of Exchange, alcohol,though they are included in the Union List andlevied by the Union, shall be collected by the Stateinsofar as leviable within their respective territoriesand shall form part on the States by whom theyare collected (Art. 268).

(D) Taxes Levied as well as Collected by theUnion but assigned to the States withinwhich they are leviable:

(a) Duties on succession to property other thanagricultural land. (b) Estate duty in respect ofproperty other than agricultural land, (c)Terminal taxes on goods or passengers carriedby railway, air or sea, (d) Taxes on railwayfares and freights (e) Taxes on stock exchangeother than stamp duties (f) Taxes on sales andadvertisements in newspapers (g) Taxes on thesale or purchase of goods other thannewspapers, where such sale or purchase takeplace in the course of inter-State trade orcommerce (h) Taxes on inter State consignmentof goods (Art. 269).

(E) Taxes Levied and Collected by the Unionand Distributed between Union and the State:

Certain taxes shall be levied as well as collectedby the Union but their proceeds shall be dividedbetween the Union and the States in a certainproportion, in order to effect an equitable divisionof the resources. These are:-

(a) Taxes on income other than on agriculturalincome.

(b) Duties of Excise as are included in the UnionList, excepting medicinal and toilet preparations(Art. 272).

Power to Levy Tax: Art. 265 declares that notax shall be imposed except by authority of law.The executive has no authority to impose a tax. Itcan be levied only by an Act of appropriatelegislature.

Tax and Fee: A tax is a compulsory exactionfor the general benefit. It is levied as a part ofcommon burden. Its purpose is to collect revenue.Fee is also a compulsory exaction but it has somerelation to a special benefit or privileges accruingto the individual who pays it.

Changes in sharing of revenues between theUnion and the States: The Constitution (80thAmendment) Act, 2000 which has come into effectretrospectively from 1.4. 1996 has drasticallychanged the distribution of revenue between theUnion and the States. Prior to this amendment,taxes on income (other than agricultural income)and duties of Excise were levied and collected bythe Union but were shared by the Union and theStates. The actual percentage of sharing wasdetermined by a Presidential order made afterconsidering the recommendation of the FinanceCommission. After the 80th Amendment all taxesand duties referred in to the Union List exceptingsurcharges on taxes and duties and cess levied forspecial purposes are divisible between the Unionand the States. The duties of customs andcorporation tax, etc. which earlier belongedexclusively to the Union have become divisible onthe recommendation of 10th Finance Commission.

Service Tax: A new tax called service tax hasbeen started by the 88th Amendment Act, 2003.The Government of India can levy taxes on services.Service tax shall be collected by the Government ofIndia and the States. The proceeds of services taxshall be divisible between the Union and the States.

Surcharge for the Union: Article 271 provides

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for levy of surcharges on duties and taxes. Theproceeds of such surcharges go to the Unionexclusively. From time to time the governmentimposes surcharge on income tax, corporate tax,etc. It has also levied surcharge and additionalsurcharge for purposes of the Union on Customsand Excise duties. The States have no share in thesurcharges.

Grants-in-Aid: The Constitution provides forthe following types of grants-in-aid:

(a) Article 275 provides for grants-in-aid to theStates. Parliament can make grants to the needyStates depending on the assessment of their need.Special grants may be given for promoting thewelfare of the scheduled tribes or for raising thelevel of administration of the scheduled areas.

(b) Article 282 empowers the Union and theStates to make grant for any public purpose. Itmay even give grant for a purpose for which itmay not have power to make laws.

Modification in centre-state financial relationsduring emergency:

(1) While a proclamation of Emergency declaredunder Art. 352 is in operation, the President maydirect that all or any of the provisions of Art. 268to 279 (in regard to division of taxes and grant inaid) shall remain suspended or may be modified.

(2) While a proclamation of financial emergencydeclared under Art. 360 is in operation, the Unionmay give following direction to any State:

a. To observe such canons of financialpropriety and other directions as may bespecified.

b. To reduce the salaries and allowances of allpersons serving under the State (including HighCourt Judges).

c. To reserve all Money Bills and Financial Billsfor the consideration of the President.

COOPERATIVE FEDERALISM

The essence of federalism is distribution oflegislative, executive and financial powers betweenthe constituent of federalism which has beenconstitutionally distributed between the Union andthe States. However, the trend world-over istowards what is called "cooperative federalism"under which both the Union and the States comeand join together in cooperative-collaborative

manner. In India also this trend has been concep-tualized and given concrete expression both withinthe Constitution as well as outside it. While Inter-State Council is a constitutional device of cooperativefederalism, Zonal Councils, National DevelopmentCouncil (NDC), National Integration Council (NIC),etc. are extra constitutional mechanisms to furtherthe cause of cooperative federalism.

INTER-STATE COUNCIL

Establishment of Inter-State Council (Art. 263):To bring about meaningful cooperation among theStates Art. 263 contemplates establishment of anInter-State Council. It consists of the Prime Minister,the Chief Ministers of all States and UnionTerritories and six Union Ministers of cabinet rank.The Prime Minister is the Chairman of the Council.

The duties of the Council are:(a) Inquiring into and advising upon disputeswhich may have arisen between the States.

(b) Investigating and discussing such subjectsin which some or all of the States, or the Unionand one or more of the States, have a commoninterest.

(c) To make recommendations upon such asubject and for better co-ordination of policyand action in respect to that subject.

The main objective behind this provision is toestablish regular recognized machinery for inter-Governmental consultation and Inter-Staterelations. Such a body will give an opportunity tothe States to express their views freely on commonmatter and would enable the Union to understandthe feeling of the States and Inter-Governmentcooperation will ensure smooth carrying on ofdevelopmental plans.

For the first time an Inter-State Council wasconstituted on May 28, 1990 consisting of thefollowing members:

(a) Prime Minister (ex-officio Chairman)

(b) Chief Ministers of all States; and of thoseUnion Territories which have a legislativeAssembly.

(c) Administrators of Union Territories nothaving a Legislative Assembly.

(d) Six Union Ministers of Cabinet rank.

The Inter-State Council has met for only tentimes. The meetings of the Council are held in cameraand therefore the details of the agenda items and

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the proceedings of the meetings cannot be shared inthe public domain.

The Ninth Meeting of the Inter-State Council heldon 28.6.2005 discussed the following agenda items:

1. Blue Print of Action Plan on Good Governance

2. Disaster Management - Preparedness of Statesto Cope With Disaster

3. Implementation Report on the decisions takenby Inter-State Council on the recommendationsof Sarkaria Commission.

The Tenth Meeting of the Inter-State Councilheld on 9.12.2006 discussed the following agendaitems:

1. Atrocities on Scheduled Castes and ScheduledTribes and status of implementation of the ScheduledCastes/Scheduled Tribes (Prevention of Atrocities)Act, 1989.

The Council-Secretariat closely monitors theimplementation of the recommendations of theCouncil with the concerned. In the ten meetings ofthe Inter-State Council held so far, the Council hastaken final view on all the 247 recommendationsmade by Sarkaria Commission on Centre-Staterelations. Out of these 247 recommendations, 65recommendations have not been accepted by theCouncil, 179 recommendations have beenimplemented and 3 recommendations are at variousstages of implementation.

NATIONAL DEVELOPMENT COUNCIL(NDC)

The first Five Year Plan had recommended theconstitution of a National Development Council toreview the working of the Plan and of its variousaspects. It was constituted in August, 1952 by aCabinet resolution of the Union Government. Thus,it is an extra constitutional body not envisaged bythe Constitution. The NDC is composed of the PrimeMinister, the Chief Ministers of all the States,representatives of the Union Territories and themembers of the Planning Commission.

The function of the NDC are:

(i) To review the working of the National Plan fromtime to time;

(ii) To consider important questions of social andeconomic policy affecting national development;

(iii) To recommend measures for the achievement ofthe aims and target set out in the nation plan,

including measures to secure the activeparticipation and cooperation of the people,improve the efficiency of the administrativeservice, ensure the fullest development of theless advanced regions and sections of thecommunity and, through sacrifice borne equallyby all citizens, build up resources for nationaldevelopment.

(iv) The Council makes its recommendations to boththe Central and State Governments. TheSecretary of the Planning Commission acts asthe Secretary to the Council and the PlanningCommission furnishes administrative andassistance for the work of the Council.

ZONAL COUNCILS

The State Reorganisation Act, 1956 has set upfive Zonal Councils, namely, the Northern ZonalCouncil, the Council of the Central Zone, the EasternZonal Council, the Western Zonal Council and theCouncil of the Southern Zone. A sixth council namedas the North Eastern Council was set up under thenorth Eastern Council Act, 1971. Each of theseCouncils consists of the Home Minister of theGovernment of India, Chief Ministers of the memberStates and two other ministers nominated by thegovernor of the State concerned. The Union HomeMinister is the ex-officio chairman of each of theseCouncils. In each Council advisers from the PlanningCommission and the Chief Secretaries of the StateGovernments concerned are included. It has aseparate staff and a secretariat. Such Councils havebeen established for the promotion of collectiveapproach and effort to solve common problem ofthe member States. They are intended to foster inter-State concord and thereby to strengthen the Centreand the State. They would work to promote co-operation; successful implementation and executionof developmental projects and would also act asadvisory bodies in matters of common interest,particularly in respect of economic and socialplanning. They would also provide a forum forsettling border disputes and other problems relatingto linguistic minorities or inter-State transport, etc.By and large these Councils have been nonfunctional, inter-alia for lack of initiative, absence ofproper secretariat, shyness to discuss controversialand sensitive issues, and one party rule at the Centreand most of the State. The Commission on CentreState Relations has recommended revamping ofthese Councils by removing their weaknesses andto make them functions.

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NATIONAL INTEGRATION COUNCIL

The National Integration Council (NIC) wasconstituted by Jawaharlal Nehru in 1961 to reviewall matters pertaining to national integration andto make recommendations thereon to find waysand means to combat the evils of communalism,casteism, regionalism, linguism and narrow-mindedness. Its main function is to discuss issuesrelating to National Integration and CommunalHarmony and advise how to achieve these nationalgoals. It has held 16 meetings since it wasconstituted, the last one in 2013.

It was reconstituted in February, 2005. ThePrime Minister is the Chairman of the Council. TheUnion Ministers, Chief Ministers and politicalleaders are its members. The NIC has representationfrom various categories such as nationalcommissions, media persons, business, eminentpublic figures and women. The total strength ofthe reconstituted NIC is 103.

FINANCE COMMISSION

Article 280 provides for the constitution of aFinance Commission. The Commission is constitutedevery five years by the President. The Commissionconsists of a chairman and four other members tobe appointed by the President. The Chairman shallbe a person who has experience in public affairs.The other four members shall be selected frompersons who (1) are qualified to be a High CourtJudge or (2) have special knowledge of the financeand account of the Government or (3) have wideexperience in financial matters and in administrationor (4) have special knowledge of economics.

The members continue to hold office for theperiod specified in the Presidential order. TheCommission is vested with the powers of a civilCourt in respect of summoning and enforcing theattendance of witness, production of documents,etc.

Functions of the Finance Commission:-

(a) The distribution of taxes between the Unionand the States and allocation of shares of suchproceeds between the States.

(b) The principles which should govern the grants-in-aid to be given to the States by the Union.

(c) Measures to increase the Consolidated Fund ofthe State so that the funds of the panchayats

and municipalities in the State may besupplemented.

(d) Any other matter that may be referred to it bythe President in the interest of sound finance.

PLANNING COMMISSION

The Planning Commission was constituted in1950 by a Cabinet resolution to prepare the FiveYear Plans. The Prime Minister is its Chairman. Ithas a Deputy Chairman who is always a notedeconomist. Besides, it has five full time members.The Deputy Chairman enjoys the status of a CabinetMinister while the other members have the statusof a Minister of State. Though, primarily it was setup to formulate Five Year Plans for economic andsocial development of the country, over the yearsits activities have been extended over the entiresphere of administration excluding defence andforeign affairs. Although it is a wing of the UnionExecutive, it has encroached upon the autonomyof the States under the federal system. Secondly, ithas overshadowed the Finance Commission whichis a constitutional body. Of the total devolution ofresources from the Union to the States, 68% isdevolved through Planning Commission under Planexpenditure while only 32% is devolved by FinanceCommission under non - Plan expenditure.

MAJOR ISSUES BETWEEN CENTRESTATE RELATIONS

����� Misuse of Articles 356 and 355

The repeated misuse by the Centre of theprovisions of Article 356 of the Constitution todismiss State Governments and dissolve StateAssemblies has been subverting the federal principleand the rights of the States. The demand to restrictthe use of Article 356 only to cases where there isa serious threat to national unity or the secularfabric of the country has been raised from variousquarters in successive meetings of the Inter-StateCouncil. In view of the Supreme Court judgementon the S. R. Bommai case, there is an urgent needto build in strong safeguards in Articles 356 and365 through appropriate amendments of theConstitution. However, no decision has been takenby the Union Government in this regard. There isalso a new and alarming proposal for Centraldeployment of paramilitary forces in the Statesunilaterally in a situation which the Centre would

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consider as an 'internal disturbance'. The provenanceof Article 355 needs to be clarified. As has beenrepeatedly stressed by several constituents of theInter-State Council, the term 'internal disturbance'in Article 355 is related to 'public order', which isthe first entry in the State List. The proposal forCentral deployment of paramilitary forces in a Statein a situation which the Centre would consider as"internal disturbance" without the State'sconcurrence is unacceptable. Article 355 should beamended on the lines suggested above for Article356. Apart from external aggression, only a seriousthreat to national unity or an assault on the secularprinciple can be taken cognizance of.

����� Appointment and Role of Governors

The provision for Centrally appointed Governorsfor the States has remained as an anachronism,which is not in keeping with a federal democraticpolity. If the post of Governor has to be retained,then the Governor should be appointed by thePresident from a list of three eminent personssuggested by the Chief Minister, satisfying thecriteria mentioned by the Sarkaria Commission. Thishas also been repeatedly discussed in the Inter-StateCouncil. None of the major countries of the worldwith a federal constitution have any provision for apost of the Governor in a State to be appointed bythe Centre. There should also be a time limit withregard to Governor's assent to Bills passed by theState Assemblies. Moreover, the requirement of anexplicit norm debarring Governors from publiclyexpressing disagreements or differences with theState Government, also need to be debated. There isalso a need to review whether Governors shouldcontinue to be ex-officio Chancellors of StateUniversities.

����� Central Intrusion into the State List

Not only have the earlier transfer of State subjects,such as education, to the Concurrent List been leftunreversed, but further intrusions have also beenmade into the State List in terms of proliferation ofthe so-called Centrally Sponsored Schemes. TheseCentral schemes on the State subjects, which containrigid guidelines imposed by the Centre, besideshaving implications in the financial sphere, alsoimpair the autonomy of the States and affect theirdevelopment priorities. There is an urgent need toreview the impact of the transfer of legislative itemsfrom the State to Union/Concurrent List. The Union

Government has so far ignored the demand of theStates to place at least the residuary powers oflegislation in the State List. The residuary power oftaxation in the sphere of services is being pre-emptorily used by the Union Government to thetotal exclusion of the States. Despite discussions inthe Inter-State Council, the proposal for aConstitutional amendment to set definite time-limitsfor receiving the assent of Governors or the Presidentin the case of bills passed by the State Assemblieshas so far been ignored. Moreover, there is no formalinstitutional structure that requires mandatoryconsultation between the Centre and the States inareas of legislation under the Concurrent List.

����� Treaty-making Powers

The present Constitutional scheme with regardto treaty making power being exclusively in thedomain of the Union Executive needs to be urgentlyreviewed. The Constitution should be amended tomake legislative sanction mandatory for anyinternational treaty. Besides, several internationaltreaties like the WTO agreement have seriousimplications for the States, especially with respect toState subjects like agriculture. In all such cases,consultation with the States and concurrence of theInter-State Council must also be made mandatory.

Issues Related to Present Institutional Arrangements

����� Inter-State Council

The functioning of the Inter-State Council, whichhad gathered some momentum in the earlier years,has once again lost steam. Despite the Councilarriving at several decisions regarding implemen-tation of the Sarkaria Commission's recommen-dations, they have not been implemented by theUnion Government. The decisions of the Inter-StateCouncil therefore have to be made binding on theUnion Government, through appropriate Consti-tutional amendment.

All major issues involving Centre-State relations,including legislations under the Concurrent List, haveto be discussed and decided by the Inter-StateCouncil. The schedule of meetings of the Council aswell as the Standing Committee of the Council hasto be made mandatory. The Inter-State Councilshould mandatorily meet twice a year. TheSecretariat of the Inter-State Council should havebetter representation from the States.

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����� NDC and Planning Commission

The National Development Council has to bedeveloped as an effective instrument for Centre-Stateco-ordination and should be given, through anappropriate amendment, a Constitutional status aswas suggested in the Srinagar Conclave. Themeetings of the NDC should be more frequent (atleast once in every quarter), and its functioningshould not be one of hastily imposing a pre-conceivedview of the Centre as a consensus on the States, asis now often practised. Instead, each issue shouldbe discussed seriously with written notes from theCentre and the States, and decisions should be takendemocratically and implemented expeditiously. ThePlanning Commission should act as an executivewing of the NDC. Unlike the present compositionof the Planning Board where members and expertsare all nominated by the Centre, there should beadequate representation of the States - both formembers as well as experts - with at least one fromeach region with periodic rotation among the Statesin a region. The restructured Planning Commissionmust not act primarily as a representative of theCentre as it is now, but should also represent fairlythe interests of the States.

����� Finance Commission

A basic problem with the Finance Commissionis that the views expressed by the States are nevertaken into account seriously, while determining theterms of reference of the Commission. All themembers of the Finance Commission are nominatedby the Centre and representatives of the States arenever included. These practices need to be changed.In determining the terms of reference, the views ofthe States should be taken into account seriously,and if there is any difference of views on the termsof reference, the same should be settled in the Inter-State Council. In the choice of members of theCommission, unlike the present practice, thereshould be adequate representation of the StateGovernments.

BARRIERS TO INTER-STATE TRADEAND COMMERCE

Free flow of trade without geographicalbarriers is sine-qua-non for economic prosperitynationally as well as internationally. Therefore,progressive removal of such barriers has been a

general phenomenon in social evolution in themodern world. Today we are vigorously pursuingthe goal of free flow of trade among the nations ofthe world under the banner of globalisationthrough, for example, the WTO among the nationsof the world. Regionally, member states of theEuropean Community, for example, have alreadyachieved that goal almost fully.

As economy is the most important source ofpower and identity in the world of today, thenations or regions that constitute the federation donot want to lose their hold on economic power.Nor do the economically strong States want theeconomically weak States to become parasites onthem. Therefore, an arrangement must be devisedwhich will ensure free flow of trade, encouragefair competition and simultaneously remain capableof discouraging and regulating unfair tradepractices.

One common arrangement found in allfederations in this regard, is the division betweenthe inter-state and intra-state trade and commerce.While the regulation of the former is assigned tothe federal authority, the States retain the regulationof the latter. Some federations have gone furtherand made inter-state trade free from regulation bothby the federal authority as well as the authority ofthe States. Australia is the foremost example ofthat. India goes one step further than Australia inso far as it makes flow of inter-state as well as intra-state trade free from regulation by the Union aswell as the States. However, unlike Australia, aftermaking such a general declaration, the Constitutionof India gives adequate powers to the Union andthe States, particularly to the former, to regulatetrade and commerce.

Need for Trade and Commerce Commission

In order that the country's competitiveness intrade, commerce and industry is enabled to respondto the increasing pressures of globalisation, it isnecessary that barriers to inter-state trade andcommerce, particularly, the free movement of goodson the inter-state routes should be progressivelyreduced with a view to their final elimination. Astatutory authority contemplated under Article 307of the Constitution requires being set-up. As theeffects of such an authority could as well go beyondthe purposes of Article-307, the legislation could becomprehensive drawing on Entry 42 of List -I and,if necessary, Entry 97 of List-I of the Seventh

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Schedule. The composition of the authority mayprovide for representation of the FICCI, CII,Railway Board, FSIME (Federation of SmallIndustries and Micro Enterprises), Indian Societyof Automobile Manufacturers, National HighwayAuthority of India, NCAER, National Institute ofPublic Finance and Policy, Inter-State Council,School of International Studies (Jawaharlal NehruUniversity), Planning Commission and Ministry ofSurface Transport.

For carrying out the objectives of Articles 301,302, 303 and 304, and other purposes relating tothe needs and requirements of inter-state trade andcommerce and for purposes of eliminating barriersto inter-state trade and commerce Parliamentshould by law establish an authority called the"Inter-state Trade and Commerce Commission"under the Ministry of Industry and Commerceunder Article 307 read with Entry 42 of List-I.

INTER-STATE DISPUTES

In a constitutional set-up where powers aredistributed between the Union and the States, it isnatural to expect disputes as to on which side of theboundary a particular matter falls. Where suchdifferences do arise, it is desirable that there shouldbe a well thought out systemic mechanism for theresolution of such inter- State disputes.

Article 131 relates to the original jurisdiction ofthe Supreme Court and provides the judicialmechanism for dealing with inter-Governmentaldisputes involving any questions of law or fact onwhich existence or extent of a legal right dependsbetween the Government of India and one or moreStates or between the Government of India and anyState or States on the one side and one or moreother States on the other or between two or moreStates. However, a few matters are excluded eitherby express provisions or by necessary implication.

Various Commission have recommended thatArticle 139A, which confers power on the SupremeCourt to withdraw cases involving the same orsubstantially the same question of law, which arepending in Supreme Court and one or more HighCourts, should be amended so as to provide that itcan withdraw to itself cases even if they are pendingin one court where such questions as to the legislativecompetence of the Parliament or State Legislatureare involved.

Inter-State Water Disputes

Water is a prime resource for sustaining life onearth. The domestic, agricultural and industrial usesof water are multiplying day by day and thisphenomenal increase in demand for water in diversefields has resulted in its scarcity. Moreover,availability of water is highly uneven in both spaceand time as it is dependent upon varying seasons ofrainfall and capacity of storage. India is served bytwo great river systems, i.e. the Great HimalayanDrainage system and the peninsular river network.It has 14 major rivers that are inter-State rivers and44 medium rivers of which 9 are inter-State rivers.Eighty five per cent of the Indian landmass lies withinits major and medium inter-State rivers.

The Constitution does not itself lay down anyspecific machinery for adjudication of water disputes.Article 262(1) lays down that Parliament may bylaw provide for the adjudication of any disputes orcomplaints with respect to use, distribution or controlof the waters of, or in, any inter-State river or rivervalley. The subject "Water, that is to say, watersupplies, irrigation and canals, drainage andembankments, water storage and water power,subject to the provisions of Entry 56 of List I" is amatter enumerated in entry 17 of the State List (ListII) of the Seventh Schedule.

The expression "regulation and development ofinter-State rivers and river valleys" in Entry 56 ofthe Union List in the Seventh Schedule of theConstitution would include the use, distribution andallocation of the waters of the inter-State rivers andriver valleys between different riparian States.Otherwise the provision for the Union to take overthe regulation and development under its controlmakes no sense and serves no purpose. The RiverBoards Act, 1956 which is admittedly enacted underEntry 56 of the Union List for the regulation anddevelopment of inter-State rivers and river valleysdoes cover the field of the use, distribution andallocation of the waters of the inter-State rivers andriver valleys. The very basis of a federal Constitutionlike ours mandates such interpretation and wouldnot bear an interpretation to the contrary whichwill destroy the constitutional scheme. Although,therefore, it is possible technically to separate the"regulation and development" of the inter-Staterivers and river valleys from the "use, distributionand allocation" of water, yet it is neither warrantednor necessary to do so.