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Worsening Centre, states relation poses a 'threat to federalism'

By Dilasha Seth, Shreya Jai & Sanjeeb Mukherjee
October 20, 2020 15:27 IST
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When the Centre tries to encroach upon the subjects that are under the prerogative of the state, or where the centre tries to evade from any responsibility guaranteed to a state through a constitutional provision/obligation, it poses a threat to federalism.

Opposition-ruled states’ stand mellowed after the Centre offered to borrow Rs 1.10 trillion towards Goods and Services Tax (GST) compensation on their behalf, but the Union government’s move to invoke a tripartite agreement (TPA) to realise Rs 1,417.50 crore of power dues from Jharkhand has made at least that state reject the offer.

Though confined to one state, this is just one of many of the Centre's measures that have strained relations with states.


In the case of Jharkhand, the Union power ministry automatically debited a sum of Rs 1,417.50 crore from Jharkhand’s consolidated account - maintained by the Reserve Bank of India (RBI) - to pay for the central power generator Damodar Valley Corporation’s (DVC) dues.

This is the first installment of the Rs 5,600 crore Jharkhand owes DVC for power supplied to seven districts.

To do this, the ministry invoked the TPA it signed with the Jharkhand government and RBI on April 27, 2017.

“It is really unfortunate that the Centre is unable to pay GST compensation to states.

"To add to our woes, it is asking RBI to debit money from the state’s consolidated fund,” said Jharkhand Chief Minister Hemant Soren.

Such misuse of power was never seen since Jharkhand was formed or even earlier, he said.

“This act is an attack on the federal structure,” Soren added.

Other recent measures, too, have escalated tensions between the Centre and states - none more so than the three farm laws recently passed by Parliament.

One major criticism of the three laws - the trade Act, the contract farming Act, and amendments to the Essential Commodities Act - is that they allegedly infringe upon states’ rights.

The trade Act, which regulates out of mandi transactions and lays down that states won’t be allowed to charge any fee on such deals, has been criticised by states as a gross violation of their constitutional rights.

Some, like Punjab and Kerala, are planning to appeal against these laws in the Supreme Court.

In fact, Punjab will hold a special session of the state Assembly in the next few days to discuss the three laws and also how the state’s interest can be safeguarded.

And, Congress-ruled Chhattisgarh is reportedly working out a mechanism to ensure that the central Acts don’t come into play there.

Even non-Congress states like West Bengal, Andhra Pradesh, and Odisha have constituted committees to study the laws.

However, not everybody is convinced of the states’ claims.

Says constitutional expert Subhash Kashyap: “The Union is within its powers to do what it is doing.

"It is not violating the seventh schedule, which provides for distribution of power.

"We can question the Centre only if the seventh schedule is violated.”

States have also objected to a proposal to allow land acquisition under the Coal Bearing Areas (CBA) Act, 1957.

This would entail the Centre acquiring land and then leasing it to miners.

The states of Chhattisgarh and Jharkhand and several local activist groups in these states have protested against this.

Activists said the amendment would take away states’ authority on land and the revenue garnered from it.

Then there are states’ reservations over the Union power ministry’s proposal to amend the Electricity Act, 2003, to enable turnaround of discoms.

These include encouraging states to tie-up with private franchisees for power supply, introduce direct benefit transfer (DBT) of electricity subsidy and phasing out of cross-subsidy charges levied on industrial consumers.

Even Bihar, ruled by a coalition of the Janata Dal (United) and Bharatiya Janata Party, has opposed this move - along with other states like Rajasthan, West Bengal, Odisha and Kerala - citing the threat of privatisation and increase in electricity rates.

S S Ahluwalia, a Supreme Court advocate, said the Centre encroaching on the state list will damage the Indian federal system.

“Any Bill passed by Parliament should respect constitutional authorities.

"Article 257 of the Constitution empowers the Union government to extend powers to states to discharge the proper functioning, but that does not mean the states should be deprived of discharging those under the state list,” he said.

Pradeep Kumar Jain, managing partner at Singhania & Co, pointed out that this is not the first time that such things have happened.

“The same situation existed before 1989, when today’s Opposition had a brute majority at the Centre and in states, which resulted in frequent changes in the Constitution.”

He said neither Parliament nor states can do anything ultra vires to the Constitution.

“If one has a majority to amend the Constitution, it cannot be termed unconstitutional unless it is against the basic structure of the Constitution,” Jain said.

Sumit Batra, partner at India Law Alliance, said when the Centre tries to encroach upon the subjects that are under the prerogative of the state, or where the centre tries to evade from any responsibility guaranteed to a state through a constitutional provision/obligation, it poses a threat to federalism.

“For a nation to grow, it is important that the central and state governments move together.

"The encroachment of subjects enshrined in the state list of Schedule VII by the Centre may result in collapse of the overall federal structure,” he said.

With inputs from Indivjal Dhasmana

Photograph: Reuters

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Dilasha Seth, Shreya Jai & Sanjeeb Mukherjee in New Delhi
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