Shubham Satyam (The author is a UPSC aspirant and has cleared the Civil Services Mains Examination, 2020 conducted by the Union Public Service Commission)
We are amidst the second wave of a crisis of unprecedented magnitude. The pandemic is pushing health systems to the breaking point and wreaking havoc on the economy and livelihoods. Nothing has been left untouched by the virus which is spreading like wildfire. Our federal polity is no exception. In fact, the Indian federal response during the pandemic has offered an opportunity to revisit the debate around the evolving nature of federalism in India.
We must first understand the idea of federalism and how it has been envisaged in the Indian constitution. In its basic sense, the term 'Federalism' refers to the distribution of powers between two or more levels of government. Such distribution of powers between the union and the states has been envisaged in the Indian constitution through Article 246 and Schedule VII. Article 246 provides for a three-fold distribution of legislative subjects between the Centre and states. Schedule VII distributes the legislative subjects among three lists- Union List, State List and Concurrent List. Thus, the constitution creates a federal system in which both union and states work in their respective jurisdictions with considerable independence. However, the balance of power is tilted towards the Centre. No wonder then, the framers of our constitution used the word, ‘Union’ in Article 1(1) of the constitution- “India, that is Bharat, shall be a Union of States.” Notwithstanding the wordplay, many provisions of the constitution expressly secure the predominance of the Centre over states. It was for this reason that K.C. Where, a renowned constitutional expert, described India as a quasi-federal state. In his view, India was a unitary state with subsidiary federal features rather than a federal state with subsidiary unitary features.
This federal asymmetry, however, has been the reason for the Centre and the states to be at loggerheads at times. The controversies regarding the role of state governors, central laws encroaching into matters within the domain of the states, the tendency of the central government to levy more and more cesses etc., have been the sticking points in federal relations in the past. It would be a glaring omission to not speak of the COVID-19 outbreak- the management of which has laid bare a few more fault lines in the federal structure recently.
Role of COVID-19
The recent instances of federal tensions trace their origin to the decision of the central government to impose a nationwide lockdown in March 2020. The central government invoked its powers under Section 6 of the Disaster Management Act (DMA) to impose the lockdown. To understand its interplay with the topic of our discussion, one must first understand how the act was passed in 2005.
Before the introduction of the DMA, the subject matter of “disaster” was missing from each of the three lists of Schedule VII. In such a case, there is an option for the central government to use its residuary power under entry 97 of the Union List to legislate on the subject. However, the Centre chose to enact the Disaster Management Act by referring to entry 23 of Concurrent List- “Social Security and social insurance; employment and unemployment”. The idea behind using the route of Concurrent List was to highlight the need for cooperative efforts in the event of a disaster. As such, the intent was to allow both the Centre and the states to frame rules and issue executive orders on the subject. It is rightfully so as no single level of government has the capability to deal with a nationwide disaster on its own.
However, the federal picture today is not as rosy as it was envisaged. Firstly, the noble spirit of cooperation among the two levels of government has been found wanting during the pandemic. Section 11 of the DMA provides for the preparation of a national plan in consultation with the State Governments and expert bodies or organisations in the field of disaster management. But, the states have complained about the lack of the element of consultation.
Secondly, due to the lockdown, the majority of the state's revenues from liquor sales, stamp duty from property transactions, etc. collapsed. Amid the scarcity of funds, the Centre increased the borrowing limit for states. However, states have complained about the nature of borrowing being conditional. Although the borrowing limit has been raised from 3% to 5% of their gross state domestic product (GSDP), only the first 0.5% of the increment is unconditional. Another 1% has been permitted only if the borrowing is linked to specific reforms such as debt sustainability, job creation, power sector reforms and urban development. The final 0.5% has been permitted only if states achieve key milestones in these areas. To add to their woes, the revenue expenditure for states has remained unchanged while an additional burden to ramp up the health infrastructure has fallen over them.
Thirdly, the first wave of the outbreak severely affected the GST collections. What it meant was a delay in the payment of the GST compensation to the states. As per the GST (Compensation to States) Act, states are to be compensated every two months, but this deadline has not been adhered to. The manner of functioning of the GST Council has also been questioned in some quarters. Recently, the Finance minister of Tamil Nadu complained about the GST Council becoming a rubber-stamp authority wherein there was little emphasis on generating consensus over decisions.
Fourth, while the PM-CARES relief fund has been put under the ambit of Corporate Social Responsibility (CSR) contributions, the contributions to the ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for Covid-19’ do not get qualified as such expenditure. This has discouraged donations to the Chief Minister’s Relief Fund, thereby making the states largely dependent upon the Centre.
And fifth, the suspension of Members of Parliament Local Area Development Scheme (MPLADS) and diversion of the funds to the Consolidated Fund of India may not be in line with the spirit of cooperative federalism. Now, MPs in their individual capacity would no longer be able to pursue developmental work in their constituencies under the MPLADS scheme.
To sum up, the pandemic has made the fault lines in our federalism more conspicuous than ever. Not a week goes by without at least one event in the newspapers highlighting the confrontationist aspect of Indian federalism. Just last week, the Union Education Minister, Ramesh Pokhriyal held a virtual meeting with state secretaries in charge of education instead of ministers to discuss the National Education Policy and the manner of the conduct of the examinations of class XII. Some of the states deemed it as an attempt by the central government to bypass their state counterparts. The Tamil Nadu Minister of School Education, Anbil Mahesh Poyyamozhi decided not to depute officials to represent his state in the meeting. In a somewhat similar show of uncongenial gesture a few days later, Mamata Banerjee along with the Chief Secretary of West Bengal, skipped a meeting convened by the Prime Minister to review the post-cyclone ‘Yaas’ situation in the state. What followed next was a tug of war between the central government and the state government, with the top bureaucrat being the rope! The point I am trying to drive home is that at a time when political leadership should remain united behind the larger goal of battling the menace, they seem divided.
At a time when the likelihood of a third wave is being discussed, piecemeal and discordant efforts would only add fuel to the already raging fire. The Centre and the states need to shed their cold indifference towards each other and draw fresh ideas seeking enhanced cooperation in wiping out this menace. To begin with, the central government must play the role of guardian in providing leadership and financial support to state governments to build their capacity. Given the impact of the pandemic on states’ revenues, it is important to expedite GST compensation payments now. Some states have also requested to extend the five-year GST shortfall compensation period beyond 2022. It would not be unwise to discuss the possibility of such a request.
Further, any effort that goes on to build trust and recalibrate the ties between the Centre and states is worth exploring. The Centre may impose some kind of self-moratorium to cap the quantum of cess and surcharge. For reforms to work, they need to be implemented in coordination with states. In that sense, the focus should be on enlarging the divisible pool of taxes. Moreover, the trust-building exercise would go a long way if the Centre shifts the responsibility of executing welfare schemes to states in a progressive manner. Over the years, states have seen the centrally-sponsored schemes as an attempt by the central government to encroach upon their domain.
In so far as the pandemic management is concerned, there is no space for complacency now. The Centre has acknowledged this fact and has recalibrated the vaccine policy after states highlighted their difficulties in procuring the doses themselves. The Centre is more suited for such a task given its superior diplomatic and political capital vis-à-vis States. Come June 21st, the Centre will provide free vaccines to states for inoculation of all above age 18. This policy reversal is a huge respite not only for the citizens but also for the otherwise deteriorating federal dynamics.
Last but not the least, it is important for both parties to engage in continuous dialogues to tide over the pandemonium created by the virus. That being said, it is the most opportune time to reinvigorate the Inter-State Council as an alternative platform for deliberation and resolution of disputes. In the last 15 years, the body has met just thrice; twice during the tenure of the Modi government. This shows that the current dispensation has taken some interest in the constitutional body. However, a lot more is needed to leverage its potential in mending federal ties. A revamped Inter-State Council should include various domain experts in the consultation process along with the political executives. The platform would not only help to shoulder the burden of the pandemic but also in keeping our efforts more cogent and coherent. At a time, when the virus has brought our lives to a near standstill, it would serve us best if federal interactions are cooperative rather than confrontationist.