The Centre-State Relation is all about the distribution of powers between Centre and States. The distribution of powers is the basic feature of federalism and the federal constitution.
Basically, there are three areas of power distribution:
- Legislative Power Distribution.
- Executive Power Distribution
- Financial Power Distribution
Legislative relations between Union and State
There are two things in power distribution in Legislative relation between the state and centre. They are:
- Territorial Distribution of Powers
- Subject Distribution
a.Territorial Distribution of Powers
The territories are distributed between the State and the centre. The Union Government has control over the entire territory of India. Whereas the states have the power only over their territories.
The central government has extraterritorial jurisdiction, that is its laws are applicable to the person and property not only in India but to Indian citizens and their properties located in any part of the world.
But the state government does not have power outside its own territory.
The territorial jurisdiction of Parliament is subject to certain limitations imposed by the constitution especially with regards to the Union Territories and Scheduled areas.
The constitution of India distributes the legislation between centre and states in an elaborate scheme.
There are three lists of distributions.
List I( Union List)
It has an exclusive subject allotted only to the Union government( Central Government).
There are 100 subjects in the Union list that includes defense, foreign affairs, banking, minting currency, etc.
List II (State List)
List II that is state list some subjects are allocated only to the state government.
There are 59 subjects that include:
Public order, and Police, Public Health, Local Government, Agriculture, Forests, Fisheries, etc
List III (Concurrent List)
In list III or concurrent list, both the central and state government has power over the subjects.
When there is a difference in opinion between the state and the centre arises, the law of the parliament will prevail.
These 52 items in the Concurrent list include Criminal law and procedure,
Civil Procedure, Marriage, Education.
Any subject which is not mentioned in the above three lists will automatically come under the jurisdiction of the Union Government.
Our constitution commonly follows the Legislative distribution of power provided in the Government of India Act 1935 by the British.
These above legislative powers will be followed normally but under exceptional circumstances, the above schemes will be suspended.
The power of the Union Parliament will be expanded and the power of the state will be diminished.
a) National Emergency
The National Emergency will be declared by the President, then the Union parliament gains the powers, and takes over the subjects from the State list.
The national emergency is declared to tackle the problems such as war, external aggression, and armed rebellion that pose a danger to the existence of our nation.
b) Agreement between States
If two or more states agree for their mutual interest by the common law on a particular subject and request the Union government to create that common law.
Then the parliament can create that common law for the desiring states on that particular subject even if it is in the state list (List II).
Usually, parliament cannot enact a law on the subject that falls under the state list. This is done based on the request from the two or more states.
c) The Parliament and State list
The Parliament will have the power to enact a law on the state subject for the purpose of implementing an international agreement.
d) After the declaration of article 356
Emergency in a state, the President can declare that the parliament will enact on State list subjects for that state.
The Constitution of India distributes executive powers between the Union and State Government.
The Union Government possesses executive powers over the subjects in the List-I, called Union List.
The states have executive powers over the subjects included in List-II, called the State List.
The executive power of the Union Government extends over the territory of India while the executive power of the state government extends over their own territories.
The distribution of the executive powers over List III called the concurrent list is a slightly complicated scheme.
The Union government retains powers to issue directions to the state government in the execution of executive functions both in normal times and during emergencies.
Another feature in the executive powers is the distribution scheme in the constitution relates to mutual delegation of functions between the Union and State Governments.
The Union government can entrust its functions to the state government after getting the consent of the state government concerned.
On the other hand, the state government can entrust its executive functions to the union government after getting the consent of the Union Government.
Moreover, the Union Government can entrust its executive function to the state government without getting the consent of the state government concerned but is get the consent of the parliament.
Centre-State Financial Relations
The Indian constitution distributes financial powers between the Union and states modeled based on the Government of India Act 1935.
There are two sources of revenue distributed by the constitution namely Tax Revenue and Non-Tax Revenue.
Tax Revenue Distribution
There are five important ways in which the tax revenues are distributed between the States and the Centre:
Some taxes like Corporation Tax and Customs tax are exclusively allotted to the central Government.
Taxes like sales tax are exclusively allotted to the states.
Some taxes are levied by the Union but collected and appropriated by the concerned states and the examples are stamp duties on the Bill of Exchange and Excise Duties on medicinal and toilet preparations with alcohol content.
Certain taxes are levied and collected by the Union Government but the proceeds are assigned to the states in which they are levied like the taxes on the sale of advertisement in newspapers.
Some taxes are levied and collected by the state government and are distributed between the Union and State Governments in a certain proportion like the tax on income other than an agriculture income.
Non-tax Revenue Distribution
Both the Union and State governments are provided with non-tax revenue sources.
The Union Government gets its revenue from the receipts from commercial and industrial undertakings related to central subjects like industrial, Finance corporations.
It gets its revenue from Railways, posts, and Telegraphs, Broadcasting, etc.
The state governments get revenue from the receipts of commercial enterprises and industrial undertakings allotted to them.
Sources among others include forest, irrigation, electricity, road transport.
The constitution understands the greater financial needs of certain states and the Article-275 asks the Union Government to provide Grants-in-aid to the states like Assam keeping in mind of development and welfare of the tribal population.
Finance Commission (Article 280)
The president of India constitutes a Finance Commission once every five years.
Article 280 of the constitution describes the composition of the Finance Commission.
The Chairman will be a person with experience in public affairs and the members with have experience in Financial administration, special knowledge of economics, public accounts, and government finances, and one member with having the qualification of a High Court Judge.
Role of Centre and State in Educational Finance
Finance Commission will give a recommendation in the following:
For the distribution of net proceeds of taxes between the centre and states.
Principles governing grants in aid.
Measures are needed to increase the Consolidated Fund of India or States to supplement the resources of the Panchayat Bodies.
Measures are needed to increase the Consolidated Fund of India or states to supplement the resources of the Urban Local Bodies.
Any other matter referred by the President. So far fourteen Finance Commission has been formed once in five years.