Undermining federalism, eroding States’ autonomy

Source– The post is based on the article “Undermining federalism, eroding States’ autonomy” published in The Hindu on 16th November 2022.

Syllabus: GS2- Issues and challenges pertaining to federal structure

Relevance: Cooperative federalism

News- The article explains the challenges to cooperative federalism in the present government.

When the NDA government came into power in 2014, there was hope that India would move towards cooperative federalism. NITI Aayog replaced the Planning Commission of India with the main objective of promoting cooperative federalism.

But no steps have been taken to promote cooperative federalism by NITI Aayog.

Which instances show that the Union government has not followed the spirit of cooperative federalism?

Finance Commission recommendations– The Fifteenth Finance Commission, in its first report, had recommended a special grant to three States amounting to ₹6,764 crore. It was to ensure that the tax devolution in 2020-21 in absolute terms should not be less than the amount of devolution received by these States in 2019-20. This recommendation was not accepted by the Union Government.

A similar approach has been followed by the Union Government with regard to grants to States recommended by the Finance Commission for the period 2021-26.

This clearly demonstrates that the Union Government has undermined the stature of the institution of the Finance Commission and cooperative federalism.

Off-budget borrowings– The decision to treat off-Budget borrowings from 2021-22 onwards serviced from the State budgets as States’ borrowings and adjusting them against borrowing limits under FRBM in 2022-23 and following years. It is against all norms.

The Government of India has indicated that such a decision is in accordance with the recommendation of the Finance Commission. In fact, there is no recommendation to this effect by the Fifteenth Finance Commission.

The borrowings by corporations against State guarantees are mostly used for capital investment. The Centre has also been raising off-Budget borrowings but mainly for meeting revenue expenditure. The CAG Report on the Compliance of FRBM Act for 2017-18 and 2018-19 pointed out as many as eight instances of meeting revenue expenditure through Extra Budgetary Resources.

Cesses and surcharges– The NDA government has been resorting to the levy of cesses and surcharges. These are not shareable with the States under the Constitution.

The share of cesses and surcharges in the gross tax revenue of the Centre increased from 13.5% in 2014-15 to 20% in the Budget estimates for 2022-23.

Centrally sponsored schemes– Many committees of government have recommended the need to curtail the number of centrally sponsored schemes.

The Government of India has grouped them under certain broad umbrella heads. In 2015, the Centre increased the States’ share in a number of CSS. It has burdened the States. They have lost their autonomy in this process.

Encroaching state powers– The Centre has enacted three farm laws though agriculture is a subject listed in the State List under the Constitution. Though these Acts have been repealed, their enactment is against the spirit of the Constitution. States were not even consulted while introducing these Bills.