In this exclusive interview, Alok Prasanna Kumar examines Indian federalism in light of Karnataka, Kerala and Tamil Nadu approaching the Supreme Court against the Union government's refusal to provide them financial relief.
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ALOK Prasanna Kumar is a lawyer based in Bengaluru and a co-founder of the Vidhi Centre for Legal Policy. In an exclusive interview with The Leaflet, he discusses the southern states of Karnataka, Kerala and Tamil Nadu approaching the Supreme Court seeking its intervention for getting financial relief.
Abhish K. Bose: The southern states of Karnataka, Kerala and Tamil Nadu have approached the Supreme Court, alleging that the Union government has denied them their rightful share of funds.
Karnataka, in a writ, has demanded the release of the National Disaster Relief Fund (NDRF) from the Union to tide over the 'grave humanitarian crisis' the state is facing. Kerala and Tamil Nadu have also petitioned the Supreme Court on issues related to financial relief.
This has resulted in an unprecedented crisis for federalism in India as these states continue to be at loggerheads with the Union government. Are there provisions in the Constitution to solve this crisis?
Alok Prasanna: Under India's federal structure, states are empowered to make laws on subjects enumerated in List II and List III of the Seventh Schedule of the Constitution, subject to certain limitations. This includes the power to levy taxes as provided for in List II.
However, the bulk of the taxing power remains with the Union. This is a continuation of the scheme which was in existence under the Government of India Act, 1935 and the Constitution framers expressly chose to continue the same.
“Kerala and Tamil Nadu have petitioned the Supreme Court on issues related to financial relief.
Nevertheless, they understood that the Union government had a much greater capacity in raising revenue than the states. Therefore, they created various mechanisms for the redistribution of funds so that states could also carry out developmental activities without being completely dependent on the Union government. They also ensured that there was no overlap between the taxing power of the Union and the states.
Two developments have taken place that the Constitution framers did not foresee. One, the Goods and Services Taxes regime has been introduced and it allows both the Union and state governments to share taxing powers over the same items (goods and services tax) to create a common market. Two, some states have developed so well that they have become less and less dependent on the Union government for the transfer of funds.
The implication is that states such as Karnataka, Kerala and Tamil Nadu are not subservient to the Union government in mobilisation of funds. However, when disaster strikes, they need additional funds only the Union government can provide. This is not part of the plan or the budget in a given year, and it is an unforeseen expenditure. The crisis has arisen because the Union government has delayed the release of funds for not very clear reasons.
I would not say that this is an unprecedented crisis because our Constitution framers created a mechanism for addressing conflicts between states and the Union, namely Article 131, which allows a state to approach the Supreme Court against another state or the Union government.
In the initial years after Independence, this was not necessary because almost all states were ruled by the Indian National Congress and differences between the state and Union governments were resolved internally.
However, with more parties, especially regionalist parties, as Dr K.K. Kailash calls them, getting stronger, other mechanisms had to be used to address disputes. That is why states are resorting to Article 131. Even if the Constitution framers did not see this exact kind of dispute arising, they understood that there had to be some mechanism to address such disputes, which is why they provided Article 131 of the Constitution.
Abhish K. Bose: Responding to the Kerala government's aspersions against the Union government of the latter not releasing funds under various categories, the Union government justifies that it was due to the state's failure to meet the necessary criteria that the funds were not allocated. Is the Union government's stand over the matter reasonable?
Alok Prasanna: In this matter, both the Union and Kerala governments have a reasonably arguable case because this is a case of a genuine constitutional vacuum.
Under Article 293 of the Constitution, states do have the power to borrow money within the territory subject to certain terms and conditions laid out in the Article.
One of the conditions is that the Union government can impose terms and conditions on state borrowing if the state owes any money to the Union or if the Union is a standing guarantor for the loan. The idea was that the Union would act as a check on the state borrowing excessively.
However, what the Constitution framers did not foresee was that some states would not need to borrow loans from the Union because they would develop very well and manage their finances adequately.
This would allow them to access the public market and take loans based on the confidence of the investor. To that extent, Kerala is right in saying that the interpretation of Article 293 cannot give the Union control over state loans even if the Constitution does not provide for it.
“The bulk of the taxing power remains with the Union. This is a continuation of the scheme which was in existence under the Government of India Act, 1935.
However, the Union also has a reasonable case to make here. The Union's case is that there are larger financial and economic concerns that need to be addressed if we say a state is completely free to take any amount of loans it needs without any restrictions from the Union. There is a constitutional vacuum and while states should be free to take loans if they are performing well, it cannot be entirely unrestricted.
This is a matter that should ideally be decided by a Constitution Bench of five judges of the Supreme Court of India because of the implications. While Kerala might be the immediate context, other states will probably follow suit.
The Supreme Court's interim Order is unfortunately unsatisfactory and does not address the important issues at the heart of the case or misunderstands them completely.
Abhish K. Bose: The minority and coalition governments that were formed between 1989 and 2014 provided an important political safeguard against the centralisation of Indian polity, something which can be easily accomplished given the rather centralising features of the Indian constitution.
“The Supreme Court's interim Order is unfortunately unsatisfactory and does not address the important issues at the heart of the case or misunderstands them completely.
However, the massive majority the Bharatiya Janata Party (BJP) received post-2014 and the absence of proper alliances from South Indian states supporting the Union government tilts the power equation in favour of the Union. Do you agree with this assessment? Are there any other reasons?
Alok Prasanna: I do not agree with the assessment for the following reasons:
The centralised features of the Constitution are not always a bad thing. There's a Central Election Commission to ensure that local majorities in states don't tamper with electoral rolls. There is a unified, centralised judiciary to ensure they are not subjected to local political pressures. The Constitution has both centralising and federalising features. The balance shifts over time depending on the style of leadership at the centre.
We must make a distinction between centralisation under the Constitution and centralisation as a style of government. A centralised style of governing cannot change the fact that states are still free to levy and collect taxes as per Part II of the Constitution. Just because there is a coalition at the Union level, the Finance Commission is not going to automatically give more money to state governments or vice versa.
The bulwark against greater centralisation has been the rise of regionalist parties. These are parties that are region-focused and their ideology is also region-focused (e.g., Telugu Desam Party, Dravida Munnetra Kazhagam, Shiv Sena and Jammu and Kashmir National Conference).
“The implication is that states such as Karnataka, Kerala and Tamil Nadu are not subservient to the Union government in mobilisation of funds.
Dr Kailash distinguishes them from regional parties such as the Samajwadi Party, Janata Dal-United and Bahujan Samaj Party which may be regional in nature but do not have a regionalist identity. Because of the success of the regionalist parties, we see even national parties copying them [like the Communist Party of India (Marxist) in Kerala and Congress in Karnataka]. It is this political ideology that has resisted centralising efforts irrespective of majorities in the Union.
Abhish K. Bose: Does Indian federalism tend to favour the centralising tendencies of the State? The abuse of various Union investigating agencies by the government— the National Investigation Agency, Central Bureau of Investigation, the Enforcement Directorate, the income tax department— points to this? What are your views?
Alok Prasanna: I repeat my earlier point, there is a constitutional basis for centralising and there is a style of functioning that is centralising. It is not only the Union government that centralises. Most state governments have refused to devolve powers to local governments (as the Constitution expects) and keep powers concentrated at the state level.
That said there is no doubt Union governments have misused agencies for political gains. This is a problem that is not specific to the Constitution but to the colonial institutions we have inherited where the institution sees its role as taking orders from the government and not about working in accordance with the law and the Constitution.
“There is a constitutional basis for centralising and there is a style of functioning that is centralising. It is not only the Union government that centralises.
However, it must be kept in mind that no matter what the Constitution says, if the government decides it does not want to follow the Constitution, it is not the Constitution's fault.
Ultimately, if this is a legitimately elected government, the deeper question we must ask is why people have no faith in constitutional government and continue to reward unconstitutional behaviour.