Parliament House

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Central laws and the federal structure

The question of division of powers and responsibilities between the centre and the states has cropped up in several new legislative proposals. This issue was raised in Parliament recently during the debate on the Lokpal and Lokayuktas Bill and the constitutional amendment which was negatived.

The Constitution provides a scheme for demarcation of powers through three ‘lists’ in the seventh schedule. The union list details the subjects on which Parliament may make laws; the state list details those under the purview of state legislatures; and the concurrent list has subjects in which both Parliament and state legislatures have jurisdiction. The Constitution also provides primacy to Parliament on concurrent list items: if there is a conflict, a central law will override a state law.

In this context, three broad issues have arisen recently with respect to laws considered by Parliament. First, some laws have large financial implications for state budgets. Second, some laws leave little flexibility for states to tune the laws according to their needs. Third, some Bills may directly infringe upon the rights of states.

Parliament has enacted laws on subjects in the concurrent list which require states to allocate funds for implementation. States are required to comply with these laws but may not have the resources to do so. Indeed, their legislatures may have different priorities for allocating resources. Does such a law, then, conflict with the principle that state legislatures have freedom to determine their spending priorities?

For example, the Right to Free and Compulsory Education Act was passed by Parliament in 2009. The implementation of this Act would require large capital as well as revenue outlays. The Act has a provision for sharing of costs between the centre and the states; however, that still leaves states with the responsibility to provide large budgetary allocations. As the Act confers a right to every child and makes it obligatory for the state government to fulfil this right, the annual budget of each state government must include the required funds.This implies that state legislatures do not have the freedom to vote against such an allocation. In effect, the expenditure is treated as a ‘charged item’ even though it is voted upon.

The second issue is with respect to the balance between uniformity and flexibility across states when a law is made on issues in the concurrent list. For example, the Land Acquisition and Rehabilitation and Resettlement Bill has been introduced in Parliament. As land acquisition is a concurrent list subject, states may also make laws on this topic as long as those laws do not contradict the central enactment. This leaves open the question of the level of detail to be included in the central law. A higher degree of detail ensures uniformity across the country and provides the same level of protection and rights to land owners and displaced persons. However, it reduces the flexibility for states to tailor the law for their local (and possibly very different) conditions. For example, the Bill lists 25 facilities that need to be provided in any area being developed for rehabilitation and resettlement. If people in some states prefer a higher level of an item being guaranteed and are willing to take a lower level of another item in return, such a compromise would not be possible under the current Bill.

The National Food Security Bill also raises these two issues. It requires states to implement a number of initiatives, and to provide for the funds for the purpose. Indeed, the Bill does not even estimate the expenditure that would be incurred by the states. It also prescribes a uniform system for implementation across states. This is a deviation from the current system under which the centre allocates grain to states who, in turn, devise their own schemes.

There is a need for a detailed public debate on federalism and treatment of items in the concurrent list.

The third issue relates to central laws on subjects that are in the domain of state legislatures. Indeed, this issue was discussed in the debate on the Lokpal and Lokayuktas Bill which had provisions relating to state government officials. Two justifications were made for the inclusion of these provisions: first that the law was on criminal justice which is a concurrent list item, and second that India’s obligations under the UN Convention Against Corruption meant that Parliament had jurisdiction to enact such a law. This issue could arise with respect to two Bills that were introduced in the winter session. The Citizens’ Grievance Redressal Bill and the Electronic Services Delivery Bill require state government departments to publish and implement citizen charters and to provide services through electronic means respectively. Given that such services fall under the responsibilities of states, it is not clear how Parliament has the jurisdiction to make these laws.

An interesting case was that of a constitutional amendment (passed in the winter session) that added a chapter on cooperative societies. Cooperatives are listed in state list so Parliament cannot make laws to regulate them. It can make a law if the Constitution is amended to shift this item from the state list to the concurrent list (or the union list). However, shifting of items across lists needs to be approved by half of all state legislatures. The method chosen was to add a chapter to the Constitution; it is not clear whether this amendment would stand up to the charge that it effectively negates the distribution of topics across the three lists. This had also resulted in a particular type of arrangement between private parties (cooperatives) being detailed in the Constitution. Other arrangements such as companies and partnerships are regulated by ordinary laws.

The proposal to amend the Constitution to enable a common goods and services tax presents a different type of challenge. The amendment attempts to provide both Parliament and state legislatures with the power to levy tax but Parliament’s law will not override the state law. Each state will effectively have veto power over the common rate of tax across all items in all states. The Bill also creates a dispute settlement mechanism and provides for appeals to the Supreme Court. Again, the possibility is open that a state legislature may disagree with the rate, and a decision by the Supreme Court overriding its objection could impinge on the state’s power of taxation.

These examples highlight the need for a detailed public debate on federalism and treatment of items in the concurrent list. When the Constitution was framed, the argument for centralising decision making was partly based on the need to hold the country together in the formative years. Given the size and diversity of the country, it may be time to revisit the subject to find a new balance between uniformity and flexibility.