One may call it much ado about a candy that half the country hasnt even heard about, but the acrimony about revdi culture has only helped rev up the debate on the existential crisis looming over the cooperative federalism envisaged by our founding fathers. The Supreme Court should, in all its earnestness, turn its attention to the plaque of opaqueness that has accumulated over Centre-state relations instead of so-called freebies. Its time the country and its opinion makers understood the Centres stranglehold over states on almost all fronts, which is leading to a breakdown of trust between the two partners.
The framers of our Constitution were aware of the apprehensions raised when India embraced a federal structure with strong unitary features. But they would have never dreamt of a situation where trumpeting unilateralism is hailed as some kind of a good governance model.
Its interesting to recall how Jawaharlal Nehru defended the unitary slant of our polity. It would be injurious to the interests of the country to provide for a weak central authority which would be incapable of ensuring peace, of coordinating vital matters of common concern and of speaking effectively for the whole country in the international sphere. But B R Ambedkar assured the Constituent Assembly: The Constitution is a federal ConstitutionThe Union is not a league of statesnor are the states the agencies of the Union, deriving powers from it. Both the Union and the states are created by the Constitution, both derive their respective authority from the Constitution.
I will restrict this article to fiscal federalism since revdi culture is the focal point of the debate although the process of centralisation is now all-pervasive. Over the years, the very nature of fiscal transfer has become thoroughly centralised. For a long time, the Planning Commission and Finance Commission were the cardinal pillars of Centre-state relations on the fiscal front. But the ushering in of the Goods and Services Tax (GST), the scrapping of the Planning Commission and non-adherence to Finance Commission recommendations have led to an asymmetrical framework.
The GST that was once hailed as a milestone for cooperative federalism is now touted as a manifestation of the growing dependence of the states on the Centre. When the Planning Commission was disbanded to make way for the Niti Aayog, all the powers of allocation of resources to states were passed on to the Ministry of Finance. Consequently, even the pretence of an objective allocation of resources to states has disappeared, and all decisions were rendered ad-hoc. Under the Planning Commission, the Gadgil formula was used to allocate funds to states. However, after 2015, transfers to states are determined based not on any formula but purely political exigencies.
Consequently, the federal foundations of the Indian polity were also enormously weakened. The National Development Council (NDC), where the prime minister used to regularly meet the chief ministers, has long been abolished. Instead, CMs were made members of the governing council of the Niti Aayog. This was neither a substitute for the discussions between the planning bodies of state governments and the Planning Commission, nor the discussions in the NDC. Even the occasional visits of Niti Aayog members to states have been reduced to a formality: No serious policy discussion, leave alone decision-making, takes place during these visits.
The concerns of CMs over the dwindling state revenues raised in the recently held Niti Aayog meeting presided over by the PM needs to be taken in its right perspective. Its the states that deal with the broad range of aspirations of the people on the ground. As per the 15th Finance Commission, states bear more than 62 per cent of expenditure responsibilities but are given only 37 per cent of revenue raising power, while the Union government owns 63 per cent of revenue raising power to spend on 38 per cent of its expenditure responsibilities.
The share of cesses and surcharges, as percentage of gross tax revenue, has more than doubled: From 6.26 per cent in 2010-11 to almost 20 per cent in 2021-22. Moreover, the Comptroller and Auditor General ( CAG) has pulled up the Centre as it failed to transfer a substantial portion of the money collected from cesses and surcharges to the designated funds which ensures that they are used for the intended purpose. The very idea of a cess is being turned on its head.
Interestingly, whenever confronted with this stark reality Union Finance Minister Nirmala Sitharaman goes on the offensive saying that the Centre distributes these to states via central schemes. She doesnt realise the fact that states are not merely implementing agencies of central schemes. The Constitution empowers the states to conceive schemes to provide sustenance and relief to people. And every study proves that state government schemes are more innovative and appropriate to the targeted groups.
Non-adherence to the recommendations of its own finance commissions is the tipping point in the chaotic Centre-state relations. Despite the last two successive Finance Commissions pegging the share of states in gross taxes to over 40 per cent, the actual transfer never reached this prescribed level. The peak was 36.6 per cent in FY19 and it fell to a meagre 29 per cent subsequently. In effect, the actual share of states has only shrunk.
The Centre invited rebuke when it turned a recent all-party meeting convened to discuss the Sri Lankan issue into a podium to discipline states on the fiscal front. Ironically, the Centres debt burden has shot up from Rs 53 lakh crore to Rs 136 lakh crore since 2015 but it considers states imprudent in fiscal management. The Centres record is even worse on the fiscal deficit front and off-budget borrowing, but the propensity to find faults with states has become a permanent feature.
India is at a crossroads today and the need of the hour is cohesion and not confusion. We need unity and not uniformity, assimilation not extinction. The Narendra Modi government has to find a new narrative instead of usurping the powers of the states and crying foul at the same time.
John Brittas is a Rajya Sabha Member from CPI(M)
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