Centre State Relations

Acharya Institute of Technology,
Soladevanahalli
DEPARTMENT OF HUMANITIES AND LAW
FEDERAL SYSTEM
CENTRE – STATE RELATIONS IN
INDIA
NAME : HANUMANTHE GOWDA N A

Introduction
Essential features of Federalism
Two sets of Government - Union & State.
Division of law making powers b/w them.
Letter & Spirit of Constitution shall be
followed by them.
Judiciary shall uphold the Constitution &
settle the disputes b/w them.

Constitution Part XI & Part XII from Articles 245 –
293 deals with
Centre – State relations in India.
The constitution under Part XI deals with legislative
and administrative relations & Part XII deals with
Financial relations between the two levels of
governments.
Thus, our constitution itself has clearly divided and
distributed the legislative, executive & financial
powers between the Centre & States.

a. Legislative Relations
The constitution of India has distributed the
law making power between the two
governments in two different ways:
 With respect to Territory (Territorial Jurisdiction)
 With respect to Subject-matter.
1. The Union Parliament can make laws for the
whole or any part of the Indian territory.
The State legislature can make laws which are
applicable within its territorial limits only.

2. Jurisdiction regarding the subject – matter:
The Union Parliament has exclusive power of
legislation on all maters enumerated in the
Union/Central list
The State legislature can make laws on subjects
mentioned in the State List.
Regarding the subjects mentioned in the
Concurrent List both have the jurisdiction to
make laws.

In case of a conflict between the state & central
laws, ultimately the central law will prevail
over state law.
In our Federalism Residuary Powers are given
to the union parliament to be legislated
(Art. 248). In other federations residuary
powers are vested with the states.
From Article 245 to 255 of the constitution
deals with the legislative relations b/w the
centre and the states.

I. Union Parliaments Power to Legislate on
State subjects
Exceptional circumstances
1. Power to legislate in the national
interest (Art.249)
2. Power to legislate during the period of
emergency (Art. 250)

3. Power to legislate with the consent of
the States (Art. 252)
4. Power to legislate to give effect to
International Treaties & Agreements
(Art. 253)
5. Power to legislate in case of failure of
constitutional machinery in a State
(Art. 356).

1. Power to legislate in the National Interest
(Art. 249):
In this direction the Rajya Sabha has to
pass a resolution by 2/3 majority and
authorize the Union Parliament to make a
legislation on a subject in the state list if
it assumes any national importance.

2. Power to legislate during the period of
emergency (Art. 250):
During National emergency the Union
Parliament can legislate on any subject in all
the three lists. But such laws ceases to operate
after six months of expiration of emergency.
3. Power to legislate with the consent of the
states (Art. 252)
If the legislature of two or more states passes a
resolution authorizing the Union Parliament
to pass a law on a subject in the state list.

4. Power to legislate to give effect to
International treaties & agreements (Art. 253)
Parliament is authorized to legislate even on a
subject in the state list if it is needed to give
effect or implement International treaties or
agreements effectively.
5. Power to legislate in case of failure of
constitutional machinery in a State (Art. 356):
Parliament is authorized to pass legislation on
any subject coming under the state list during
the times of State Emergency.

II. Union Governments control over State Legislation:
A. The consent of the centre is a must for certain
bills to be passed by the state legislature on
certain subjects like - A state law providing for
compulsory acquisition of private property
shall have no effect unless it has received the
consent of the President [Art. 31(b)].
B. Governor of a state can reserve a bill passed
by the state legislature for the consideration
of the President (if it goes against the
independence of the High Court) [Art. 200]

C. A state law is authorized to tax in
respect to water or electricity but such a
law shall be valid only if it is reserved for
the consent of the president [Art. 288(2)].
D. Laws imposing reasonable restrictions
on the freedom of trade, commerce
cannot be introduced in the state
legislature without the previous sanction
of the President [Art. 304(b)]

Conclusions:
President can use absolute veto power over
state legislations.
Above various constitutional provisions clearly
illustrates the fact that the centre has
overwhelming legislative powers than that of
the state.

b. Administrative Relations
(Art.256-263)
The Indian Constitution contains detailed
provisions relating to the administrative
relations between the centre and the states so
as to prevent any clash between the two in this
regard.
The central government is very powerful even
in the administrative sphere also.

Part XI chapter 2 of the constitution
deals with the administrative relationship
between the centre and the states.
Administrative relations between the union
and the states of the federation may be
examined under two respects:
1. Techniques of Union control over States
2. Inter - State comity.

Control of Union Over States
Even during normal times Art. 256 to 263
provide for union control over the states in the
following ways –
A. Directions to the state governments,
B. Delegation of union functions to the states,
C. All India Services
D. Grants-in-aid.

A. Direction by the Centre to the States:
The union government can issue directions to
the states for the following circumstances:
1. The centre can issue directions to the states
for the proper execution of the laws passed
by the parliament (Art. 256).
2. As to in which way the state should exercise
its executive power without in any way
impeding the exercise of the executive power
of the union (Ar. 257).

3. As to the construction and maintenance of the
means of communication which are of national
and military importance.
4. Regarding the measures to be taken for the
protection of railways within the boundaries of
the state. The expenses incurred by the state
governments on this account are paid by the
union.
5. If the state government fails to carry out any of
the directions of the Union, the president has
been empowered to impose President rule over
such state after dismissing the state government
concerned.

B. Delegation of Union Functions to the State:
1. The Parliament may with the consent of the State
Government entrust either conditionally or
unconditionally to that government or to its
officers, functions relating to any matter falling
within the executive powers of the union. Thus,
the states may be converted into agents of the
Union Government.
2. However, any extra cost incurred by the state for
carrying out such an obligation is to be paid by the
Union.

C. All India Services:
1. The IAS, IPS and other officers appointed by
the UPSC are expected to serve the state
governments.
2. They draw their salaries and allowances from
the state governments but their service
matters are decided by the centre.
3. The presence of these services makes the
authority of the central government dominant
over the states.

4. These services are instituted to ensure
greater interstate co-ordination and
implementation of the policies of the
central government .
5. This also enables the central government
to exercise control over the state in
matters of execution of union laws.

D. Grants-in-aid:
Grants-in-aid given by the union government to
the states serve two purposes.
1. Through it, the central government exercises
a strict control over the states.
2. It generates centre - state co-ordination & co-
operation.

Inter-State Comity:
To achieve coordination & cooperation b/w
states the following bodies can be set up –
A. Inter-State Council
B. Inter-State Commerce Commission
C. Inter-State water Dispute Tribunal.

A. Inter-State Council (Art.263):
1. Inter-State Council, to bring about coordination
between states and to serve public interest.
2. It inquire into and advice upon disputes which
have arisen between states.
3. It investigates & discuss subjects in which some
or all of the states or Union and one or more states
have a common interest.
4. It can make recommendations on any subject for
the better co-ordination of policy & action with
respect to the subject.

B. Inter-State Commerce Commission (Art.307):
1. The parliament can set up Inter-State
Commerce Commission or any other such
authority which it considers appropriate for
enforcing the provisions of the constitution
with regard to inter-state trade and
commerce.
2. It can assign such duties to such a
commission as it deems fit.

C. Inter-State Water Disputes (Art.262):
1.The Parliament is authorized to make laws for
adjudicating any dispute or any complaint with
respect to the uses, distribution or control of
waters of any inter-state rivers & river valleys.
2. The Parliament enacted the River Board Act, 1956
and the Inter-State Water Disputes Act, 1956.
3. The Water Disputes Act, 1956 empowered the
central government to set up a tribunal for
adjudication of such disputes. The decision of the
tribunal shall be final & binding on the parties to
the dispute.

Full faith & Credit Clause (Art. 261):
1. According to Art. 261, full faith and credit should
be given throughout the territory of India to public
acts, records and judicial proceedings of the union
and every state.
2. According to clause (3), final judgment or orders
delivered or passed by civil courts in any part of
the territory of India can be executed anywhere in
the country according to law.

Emergency
1. Under a National Emergency (Art 352), the union
executive could give directions to any state as to the
manner in which the executive power was to be
exercised.
2. Under a Financial Emergency (Art. 360), the
executive authority of the union extends “to the
giving of directions to any state to observe such
canons of financial proprietary” as might be
“deemed necessary and adequate for the purpose”.
3. Article 356 of the constitution empowers the
president to impose emergency in a state in the
name of “breakdown of constitutional machinery”

4. It is expected that every state shall follow the
directions and comply with the instructions sent to it
by the union.
5. By virtue of Art. 358, the union government is
expected to take necessary steps to protect every
state against external aggression and internal
disturbances, and to ensure that the government of
every state is carried on in accordance with the
provisions of the constitution.
6. The Union government is responsible for
maintaining peace and order in the country.

Conclusions:
Therefore co-operation and co-ordination
between the centre and the states in
administrative matters is very significant.

III. Financial relations between the Centre & the States
1. The essence of federalism is not just the
distribution of functions but also the distribution
of resources necessary for the adequate and
effective performance of these functions.
2. No system of federation can be successful unless
both the union and the states have at their
disposal adequate financial resources to enable
them to discharge their respective responsibilities
under the constitution (D.D. Basu).

Chapter one of Part XII - Art. 264 to 293 provide
for Union – State Financial Relations
Finance Commission:
1. The constitution of India provides for the
appointment of a Finance commission - Art. 280.
2. The term of the commission is to be 5 years.
3. It is to consist a chairman & 4 other members to
be appointed by the president.

1. The distribution between the union & the states of
the net proceeds of taxes which are to be divided
between them and the allocation between the
states of the respective shares of such proceeds
2. The principles which should govern the grants-in-
aid of the revenues of the state out of the
Consolidated Fund of India and
3. Any other matter referred to the commission by
the President in the interest of sound finance.

Allocation of Resources:
1. The basic principle that guide the allocation of
resources between the centre and the states are
efficiency, adequacy & suitability.
2. The states are absolutely entitled to the proceeds
of taxes on the state list.
3. The union takes the proceeds of taxes in the union
list and of any tax not mentioned in any list.
4. There are no taxes on the concurrent list.

5. While the proceeds on the taxes within the state
list are entirely retained by the states, the proceeds
of some of the taxes in the union list are to be
assigned wholly or partly to the states.
6. The residuary taxing authority rests with the
union.
7. The constitution recognizes the following categories
of taxes which are available, wholly or in part to the
states.

A. Taxes and Duties Levied exclusively by the Centre:
1. The taxes enumerated in the union list and any
other tax not enumerated in the state list i.e. the
residuary tax could be levied only by the union
government.
 Example: Income Tax, Corporation tax, Duties of
Customs including export , duties of Excise, estate
duties etc., taxes on sale or purchase of News Papers
and on advertisements and fees in respect of any of
the matters in the union list.

B. Taxes and Duties levied exclusively by States:
1. There are taxes which only the states could levy,
collect and utilize.
 These include land revenue, taxes on succession to
agricultural land, estate duty in respect of
agricultural land, taxes on land and buildings, taxes
on mineral rights, excise duty on alcoholic liquor for
human consumption and opium etc., tax on
electricity, vehicles, water, animals, entertainment,
betting, gambling etc.,

 While the taxes levied by the states were exclusively
utilized by them, the taxes levied by the union were
to be shared in various ways.
 The founding fathers of the constitution were aware
of the fact that the financial resources raised by the
states may not be sufficient to meet their economic
development. So they made provision for sharing
the revenue of the union by the states in following 3
ways -
1. Duties levied by the union but collected and
appropriated by the states: (Art. 268)
 Stamp duties & duties of excise on medicinal &
toilet preparations mentioned in the union list.

2. Taxes levied and collected by union but assigned to
the states (Art. 269):
 Duties in respect of succession to property other
than agricultural land, estate duty in respect of
property other than agricultural land, terminal taxes
on goods or passengers carried by railway, sea or
air, taxes on railway fares & freights, taxes on the
sale & purchase of newspapers & on advertisements
published therein.
 The net proceeds from these taxes were assigned to
the states.

3. Taxes levied and collected by the union but
distributed b/w the union & the states (Art. 270):
 Art. 270 provided for the compulsory sharing of the
net proceeds of tax on income other than agricultural
income.
 In this case the taxes were levied and collected by
the union but the net proceeds were distributed
between the union and the states.

Grants-in-aid
The constitution provides for 3 kinds of grants-in-aid
to the states from the union resources:
 Grant-in-aid will be given to the states of Assam,
Bihar, Orissa and West Bengal in lieu of export
duty on the jute products (Art. 273).
 The sums of such grants are prescribed by the
president in consultation with the Finance
commission.

 The constitution also provides for special grants
given to the states which undertake schemes of
development for the purpose of promoting the
welfare of the STs or raising the level of
administration of the scheduled area (Art. 275).
0
 Under Art. 282, both the union and the states make
grant for any public purpose
 The central government can make grants to
hospitals or to schools.

Borrowing Powers of Union and States
 The framers of the Indian constitution realized that
the union and state governments could not get
sufficient funds through taxation.
 So the framers made proper provisions to enable
them to borrow on the security of the consolidated
funds, subject to the limitations laid down by the
Acts of the Parliament.

Exemption of union Property from State taxation
 Art. 285 exempted the property of the union from
all taxes imposed by a state or by any authority
within a state unless a parliament by law provided
otherwise.
 In the similar way, under Art. 289, property and
income of a state from union taxation.
 But this did not prevent the union from imposing
any tax in respect of a trade or business of any kind
carried on behalf of the government of a state.

The Comptroller and Auditor General
 C & AG of India appointed by the president may
entrust him duties and such power in relation to state
accounts as it may deem proper.
 He may prescribe the form in which state accounts
are to be maintained.

Financial Emergency
 During the period of Financial emergency under Art.
360, the centre may destroy the fiscal autonomy of
the states altogether.
 The president shall have the power to give
directions to the states to observe such canons of
financial proprietary as may be specified in his
communication.
 Instruct the state governments that the salaries &
allowances of all public servants be reduced. Also
direct any state to reserve all money bills or
financial bills for his consideration.
 These lead to financial dictatorship of the centre.

Conclusion:
 An examination of union-state relationship in
financial matters clearly indicates the strong
position of the centre.
 The resources of the state governments are limited
to such an extent that they need to depend on the
charitable assistance of the centre.
 The planning commission has taken away much of
the autonomy of the states in respect of finance.

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