Centre-State Relations

 Constitutional Framework:
 India's Constitution, federal in structure, divides powers (legislative, executive, and
financial) between the Centre and states.
 Judicial power is integrated, enforced by a unified judicial system for both Central
and state laws.
 Harmony and coordination between Centre and states are crucial for effective federal
operation.
 Dimensions of Centre-State Relations:
1. Legislative Relations
2. Administrative Relations
3. Financial Relations
Legislative Relations:
 Constitutional Provisions (Articles 245-255):
 Defines legislative powers' distribution between Centre and states.
 Provisions for parliamentary legislation in state field under certain conditions.
 Centre's control over state legislation.
 Territorial Extent of Legislation:
 Parliament can legislate for India; states for their territories.
 Exceptions: Union Territories, scheduled and tribal areas.
 Distribution of Legislative Subjects:
 Union List (98 subjects), State List (59 subjects), and Concurrent List (52 subjects).
 Parliament has exclusive power over Union List, states over State List, and both over
Concurrent List.
 Residuary powers vested in Parliament.
 Parliamentary Legislation in State Field:
 Parliament empowered to legislate in state matters under extraordinary
circumstances:
1. Resolution by Rajya Sabha
2. During National Emergency
3. Upon States' Request
4. To Implement International Agreements
5. During President’s Rule
 Centre’s Control Over State Legislation:
 Governor can reserve certain bills for President's consideration.
 Certain bills in State List require President's sanction.
 Centre can direct states to reserve certain bills during financial emergencies.
Territorial Extent of Central and State Legislation:
 Parliament's Legislative Authority:
 Parliament can enact laws for the entire territory of India, including states, union
territories, and any other area under Indian jurisdiction.
 Laws enacted by Parliament have applicability to Indian citizens and their property
globally, constituting extraterritorial legislation.
 State Legislature's Jurisdiction:
 State legislatures possess the authority to enact laws for the entirety or any portion of
their respective states.
 State laws typically do not extend beyond state borders unless there's a significant
connection between the state and the subject matter.
 Exceptions to Parliament's Jurisdiction:
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1. Union Territories: The President can issue regulations governing five Union
Territories (Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli,
Daman and Diu, and Ladakh), with regulatory powers equivalent to Parliament's
legislative authority.
2. Scheduled Areas: Governors can direct that specific Parliament acts don't apply to
scheduled areas within states, or apply with specified modifications and exceptions,
preserving autonomy and indigenous rights.
3. Tribal Areas: Governors of Assam and President (in Meghalaya, Tripura, and
Mizoram) possess similar powers to exempt Parliament acts from applying to tribal
areas or impose modifications and exceptions, safeguarding tribal autonomy and
customs.
Distribution of Legislative Subjects:
 Three-fold Distribution: 7th schedule
 Constitution categorizes legislative subjects into three lists:
1. Union List (List-I)
2. State List (List-II)
3. Concurrent List (List-III)
 Exclusive Powers:
 Union List: Parliament exclusively legislates on subjects such as defense, banking,
foreign affairs, etc. (98 subjects).
 State List: State legislatures have exclusive powers over subjects like public order,
police, agriculture, etc. (59 subjects).
 Concurrent Powers:
 Both Parliament and state legislatures can legislate on Concurrent List subjects like
criminal law, marriage, civil procedure, etc. (52 subjects).
 42nd Amendment Act (1976) transferred five subjects from State List to Concurrent
List, e.g., education, forests, weights and measures, protection of wild animals
and birds, and administration of justice; constitution and administration of all
courts except supreme court and high courts.
 Special Provisions:
 Union Territories: Parliament legislates for territories not under any state.
 Goods and Services Tax (GST) 101st amendment act of 2016: Parliament and state
legislatures have concurrent powers for GST. Parliament holds exclusive powers for
interstate transactions.
 Residuary Powers: Parliament holds authority over residual subjects not listed in
any list, including taxation.
 Comparison with Other Countries:
 Unlike the US where states hold residual powers, India vests such powers in
Parliament, akin to Canada.
 Indian Constitution follows the three-fold enumeration scheme from the Government
of India Act (1935) but differs by assigning residuary powers to Parliament instead of
the governor-general.
 Hierarchy of Lists:
 Union List prevails over State and Concurrent Lists, Concurrent List prevails over
State List.
 In case of conflict between Central and state laws on Concurrent List subjects,
Central law prevails unless the state law has presidential assent, with Parliament
retaining the authority to override.
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Parliamentary Legislation in the State Field:

 Normal Distribution vs. Extraordinary Circumstances:
 Generally, legislative powers between Centre and states are maintained as per the
distribution scheme.
 However, Parliament can legislate on State List matters in exceptional situations.
 Extraordinary Circumstances:
1. When Rajya Sabha Passes a Resolution:
 Parliament empowered if Rajya Sabha deems necessary for national interest.
 Requires two-thirds majority and remains effective for one year.
 State laws yield to parliamentary laws in case of inconsistency.
2. During a National Emergency:
 Parliament gains authority over State List matters during national emergency.
 Parliamentary laws prevail over state laws if conflicts arise.
3. When States Make a Request:
 Parliament can enact laws on State List subjects upon request from two or
more states.
 Applies to requesting states initially, but others can adopt later.
 Only Parliament can amend or repeal such laws.
Examples of Laws Enacted Under These Provisions:
 Prize Competition Act, 1955
 Wild Life (Protection) Act, 1972
 Water (Prevention and Control of Pollution) Act, 1974
 Urban Land (Ceiling and Regulation) Act, 1976
 Transplantation of Human Organs Act, 1994

2. To Implement International Agreements:
 Parliament can legislate on State List matters to fulfill international
obligations.
 Enables the implementation of international treaties and conventions.
Examples of Laws Enacted Under These Provisions:
 United Nations (Privileges and Immunities) Act, 1947
 Geneva Convention Act, 1960
 Anti-Hijacking Act, 1982
 Legislation relating to environment and TRIPS
1. During President’s Rule:
 Parliament empowered to legislate on State List subjects during President’s
rule in a state.
 Laws enacted remain effective beyond the duration of President’s rule.
 State legislatures can later repeal, alter, or re-enact these laws.

Centre’s Control Over State Legislation:

 Governor's Power to Reserve Bills:
 Governor can reserve certain types of bills passed by state legislature for President's
consideration.
 President holds absolute veto authority over these reserved bills.
 Pre-sanction Requirement by President:
 Bills on specific matters listed in the State List require prior sanction of the President
before introduction in state legislature.
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 Example includes bills imposing restrictions on freedom of trade and commerce.

 Direction During Financial Emergency:
 Centre can instruct states to reserve money bills and other financial bills passed by
state legislature for President’s consideration during financial emergency.
Implications:
 Constitution grants Centre superior control over state legislative matters.
 Ensures harmonization and resolution of conflicts between Union and state laws.
 Upholds federal supremacy principle to prevent legal chaos and ensure integrated legislative
policy.
 Sarkaria Commission (1983-88) highlights the necessity of federal supremacy for effective
functioning of the federal system, promoting unity in diversity.
Administrative Relations Between Centre and States:
Distribution of Executive Powers:
 Aligned with legislative powers distribution.
 Centre has executive power over Union List subjects and treaty/agreement jurisdiction.
 States have executive power over State List subjects.
 Executive power on Concurrent List subjects primarily with states unless directed otherwise.
Obligations of States and Centre:
 States must comply with Parliament's laws and not hinder Centre's executive power.
 Centre's directions to states backed by coercive sanction under Article 365.
Centre's Directions to States:
 Centre can issue directions to states on specific matters:
 Construction and maintenance of strategic communication means.
 Protection of railways.
 Providing education in mother tongue to linguistic minorities.
 Execution of welfare schemes for Scheduled Tribes.
Mutual Delegation of Functions:
 While legislative powers are rigidly distributed, the Constitution allows for inter-government
delegation of executive functions to mitigate rigidity and prevent deadlock.
 President may entrust Centre's executive functions to state with state government's consent.
 Governor may entrust state's executive functions to Centre with Central government's
consent.
 Parliament can entrust Centre's executive functions to state without state's consent, but not
vice versa.
 Delegation can be conditional or unconditional and can occur through agreement or
legislation.
Cooperation Between Centre and States:
 Constitution provisions ensure cooperation and coordination between Centre and states.
 Includes mechanisms like adjudication of disputes over inter-state waters, establishment of
Inter-State Council (by president, article 263, such a council was setup in 1990), recognition
of public acts and records, and appointment of authorities for interstate trade facilitation.
All-India Services:
 Article 312 authorises parliament to create all India services on the basis of Rajya Sabha
resolution
 Central Services and State Services exist separately, along with All-India Services like IAS,
IPS, and IFS.
 Controlled jointly by Centre and states, with ultimate control lying with Centre.
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 Established to maintain high administration standards, ensure uniformity, and facilitate

cooperation between Centre and states.
Public Service Commissions:
 Chairman and members of state public service commissions appointed by governor but
removable only by President.
 Joint State Public Service Commission can be established for two or more states, with
appointments made by president.
 UPSC can assist states in recruitment on request, and can serve the needs of a state with
approval of President.
Integrated Judicial System:
 Unified judicial system with Supreme Court at apex and state high courts below.
 Enforces both Central and state laws to eliminate procedural diversities.
 Common high courts may be established for two or more states.
Relations During Emergencies:
 National emergency grants Centre authority to issue executive directions to states, effectively
bringing them under Centre's control.
 President's Rule allows President to assume state government functions and powers.
 Financial emergency empowers Centre to direct states on financial matters, including salary
reductions.
Other Provisions:
 Article 355 imposes duties on Centre to protect states against external threats and ensure
constitutional governance.
 Governor appointed by President acts as Centre's agent in state affairs.
 State election commissioner can be removed only by President.
Extra-Constitutional Devices: In addition to constitutional mechanisms, extra-constitutional devices
foster cooperation and coordination between the Centre and states. These include advisory bodies and
conferences at the Central level.
Non-Constitutional Advisory Bodies:
1. NITI Aayog: Succeeded the Planning Commission, advising on economic and developmental
issues.
2. National Integration Council: Focuses on promoting national unity and harmony.
3. Central Council of Health and Family Welfare: Deals with health and family welfare
policies.
4. Central Council of Local Government: Addresses issues related to local governance.
5. Zonal Councils: Foster cooperation among states based on geographical zones.
6. North-Eastern Council: Facilitates development in northeastern states.
7. Central Council of Indian Medicine: Oversees matters related to traditional Indian
medicine.
8. Central Council of Homoeopathy: Deals with issues concerning homeopathy.
9. Transport Development Council: Addresses transportation-related matters.
10. University Grants Commission: Governs higher education and grants to universities.
Important Conferences:
1. Governors’ Conference: Presided over by the President, focusing on state governance and
coordination.
2. Chief Ministers’ Conference: Presided over by the Prime Minister, discussing various state-
related issues.
3. Chief Secretaries’ Conference: Chaired by the Cabinet Secretary, aimed at administrative
coordination.
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4. Conference of Inspector-General of Police: Deals with law enforcement strategies and

coordination.
5. Chief Justices’ Conference: Led by the Chief Justice of India, focusing on judicial matters
and coordination.
6. Conference of Vice-Chancellors: Discusses issues related to higher education institutions.
7. Home Ministers’ Conference: Presided over by the Central Home Minister, addressing
internal security matters.
8. Law Ministers’ Conference: Led by the Central Law Minister, discussing legal matters and
coordination.
Financial Relations:
Articles 268 to 293 in Part XII of the Constitution govern Centre-state financial relations. Here's a
breakdown of key aspects under this domain:
Allocation of Taxing Powers:
 The Constitution delineates taxing powers between the Centre and states as follows:
 Parliament has exclusive authority to levy taxes on subjects listed in the Union List.
 State legislatures possess exclusive power to levy taxes on subjects listed in the State
List.
 The Concurrent List traditionally doesn't encompass tax legislation, except for the
goods and services tax (GST) post the 101st Amendment Act of 2016.
 Residuary power of taxation (i.e., levying taxes not specified in any list) rests with
Parliament.
Restrictions on State Taxing Powers:
 The Constitution imposes several constraints on states' taxing abilities, including:
 Limiting taxes on professions, trades, etc., to ₹2,500 per annum per person.
 Prohibiting taxes on goods/services supplied outside the state or in the course of
import/export.
 Allowing taxation on electricity consumption/sale except for cases involving the
Centre or railways.
 Permitting taxation on water/electricity only if related to inter-state river
management, subject to presidential approval.
Other Provisions:
 The Constitution distinguishes between the power to levy and collect taxes and the
appropriation of tax proceeds.
 It provides for the distribution of income tax proceeds between the Centre and states.
 Parliament has the authority to establish principles for taxing goods/services supplied outside
the state or in import/export transactions.
 The Constitution reserves certain taxing powers exclusively for the Centre, such as taxes on
income, customs, excise, and others.
 It empowers the Centre to assist states by deploying armed forces or other forces, a provision
that has since been repealed.
These provisions ensure a balanced allocation of taxing powers between the Centre and states while
imposing necessary checks and balances to prevent misuse or overreach in taxation matters.
Distribution of Tax Revenues:
The 80th Amendment Act of 2000 and the 101st Amendment Act of 2016 have significantly reshaped
the distribution of tax revenues between the Centre and the states in India. Here's a breakdown of the
key changes and current arrangements:
80th Amendment Act of 2000:
 Implemented the recommendations of the 10th Finance Commission.
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 Established the 'Alternative Scheme of Devolution,' allocating 29% of certain central taxes
and duties to the states, retroactively from April 1, 1996.
 Included taxes like Corporation Tax and Customs Duties in the sharing arrangement, akin to
Income Tax.
101st Amendment Act of 2016:
 Introduced the Goods and Services Tax (GST) regime, replacing various indirect taxes levied
by both the Centre and states.
 Granted concurrent taxing powers to Parliament and State Legislatures for levying GST on
goods/services transactions.
 Subsumed several central and state taxes under GST to eliminate tax cascading and establish
a unified national market.
Current Distribution Scheme: A. Taxes Levied by the Centre but Collected and Appropriated by
the States (Article 268):
 Includes stamp duties on various transactions like bills of exchange, insurance policies, etc.
 Proceeds assigned to respective states, not part of the Consolidated Fund of India.
B. Taxes Levied and Collected by the Centre but Assigned to the States (Article 269):
 Covers taxes on interstate sale/purchase of goods and consignment of goods.
 Proceeds assigned to states based on principles set by Parliament.
C. Levy and Collection of Goods and Services Tax in Course of Inter-State Trade or Commerce
(Article 269-A):
 GST on interstate trade collected by Centre, distributed between Centre and states per
Parliament's recommendations.
 Parliament authorized to determine principles for identifying inter-state trade transactions.
D. Taxes Levied and Collected by the Centre but Distributed between the Centre and the States
(Article 270):
 Includes central taxes except those under Article 268, 269, and 269-A, as well as surcharges
(article 271) and specific cesses.
 Proceeds distributed by president as per Finance Commission's recommendations.
E. Surcharge on Certain Taxes and Duties for Purposes of the Centre (Article 271):
 Allows Parliament to impose surcharges on taxes under Articles 269 and 270, with proceeds
exclusively for the Centre.
 GST exempted from this surcharge.
F. Taxes Levied and Collected and Retained by the States:
 Comprise taxes exclusively for states, listed in the State List.
 Includes various taxes like land revenue, taxes on agricultural income, duties on excise, taxes
on professions, etc.
The taxes exclusively belonging to the states and enumerated in the State List are as follows:
1. Land Revenue: Tax levied on the ownership or use of land by individuals or entities.
2. Taxes on Agricultural Income: Taxes imposed on income generated from
agricultural activities.
3. Duties in Respect of Succession to Agricultural Land: Taxes related to the transfer
of agricultural land upon the death of the owner.
4. Estate Duty in Respect of Agricultural Land: Taxes imposed on the inheritance of
agricultural land.
5. Taxes on Lands and Buildings: Levies on the ownership, transfer, or use of lands
and buildings.
6. Taxes on Mineral Rights: Taxes on the extraction or use of mineral resources.
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7. Duties of Excise on Alcoholic Liquors for Human Consumption: Taxes imposed

on the production or sale of alcoholic beverages for human consumption.
8. Taxes on the Consumption or Sale of Electricity: Levies on the consumption or
sale of electrical energy.
9. Taxes on the Sale of Petroleum Crude, High-Speed Diesel, Motor Spirit
(commonly known as petrol), Natural Gas, Aviation Turbine Fuel, and Alcoholic
Liquor for Human Consumption: Taxes on the sale of specified petroleum products
and alcoholic beverages.
10. Taxes on Goods and Passengers Carried by Road or Inland Waterways: Taxes
imposed on transportation services provided by road or inland waterways.
11. Taxes on Vehicles: Levies on the ownership or use of vehicles.
12. Taxes on Animals and Boats: Taxes related to the ownership, sale, or use of animals
and boats.
13. Tolls: Charges collected for the use of roads, bridges, or other infrastructure.
14. Taxes on Professions, Trades, Callings, and Employments: Taxes imposed on
individuals or entities engaged in specific professions, trades, or employments.
15. Capitation Taxes: Taxes levied per person, often irrespective of income or property
ownership.
16. Taxes on Entertainments and Amusements: Taxes on recreational activities, events,
or amusements, often collected by local bodies like Panchayats, Municipalities,
Regional Councils, or District Councils.
17. Stamp Duty on Documents: Charges imposed on various legal documents,
excluding those specified in the Union List.
18. Fees on Matters Enumerated in the State List: Charges or fees imposed for
services or matters within the purview of the State List, excluding court fees.
Distribution of non-tax revenues
between the Centre and the states, as well as the mechanism for grants-in-aid to the states, are outlined
as follows:
A. The Centre: Major sources of non-tax revenues for the Centre include:
1. Posts and telegraphs
2. Railways
3. Banking
4. Broadcasting
5. Coinage and currency
6. Central public sector enterprises
7. Escheat and lapse
8. Others
B. The States: Major sources of non-tax revenues for the states include:
1. Irrigation
2. Forests
3. Fisheries
4. State public sector enterprises
5. Escheat and lapse
6. Others
Grants-in-Aid to the States
Grants-in-aid to the states from Central resources can be categorized into statutory grants and
discretionary grants.
1. Statutory Grants:
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 Article 275 empowers the Parliament to make grants to states in need of financial assistance,
not to every state, and different sums may be fixed for different states.
 Specific grants are provided for promoting the welfare of scheduled tribes or raising the level
of administration in scheduled areas, including Assam.
 These grants, both general and specific, are recommended by the Finance Commission.
2. Discretionary Grants:
 Article 282 allows both the Centre and states to make grants for any public purpose, even if
it's not within their legislative competence.
 These grants from the Centre to the states are discretionary and serve the purpose of assisting
states financially in meeting plan targets and influencing state action to align with national
plans.
Other Grants:
 Temporary grants were provided for a specific period, such as grants in lieu of export duties
on jute and jute products to states like Assam, Bihar, Orissa, and West Bengal.
 These grants were to be given for ten years from the commencement of the Constitution,
recommended by the Finance Commission, and charged on the Consolidated Fund of India.
Goods and Services Tax Council (GST Council):
 Established by the 101st Amendment Act of 2016.
 Constituted as a joint forum of the Centre and the States. Article 279-A
 Responsibilities include:
 Making recommendations on taxes, cesses, and surcharges to be merged into GST.
 Determining goods and services subject to GST or exempted from it.
 Formulating model GST laws, principles of levy, and principles governing the place
of supply.
 Setting the threshold limit of turnover for GST exemption.
 Deciding GST rates, including floor rates with bands.
 Recommending special rates for raising additional resources during natural
calamities.
Finance Commission:
 A quasi-judicial body established by the President every fifth year or earlier.
 Responsibilities include:
 Recommending the distribution of net proceeds of taxes between the Centre and the
states, and among states.
 Advising on principles governing grants-in-aid to states from the Consolidated Fund
of India.
 Proposing measures to augment the Consolidated Fund of a state for the benefit of
panchayats and municipalities, based on State Finance Commission
recommendations.
 Addressing any other fiscal matters referred by the President.
 Until 1960, the Finance Commission also recommended amounts paid to certain states in lieu
of their share of export duty on jute and jute products.
Protection of states intrest
1. Bills requiring President's Recommendation: Certain types of bills related to taxation and
financial matters can only be introduced in Parliament with the President's recommendation.
These include bills that impose or alter taxes or duties affecting states, bills changing the
definition of agricultural income for income tax purposes, bills impacting the distribution of
funds to states, and bills imposing surcharges on specified taxes or duties for central purposes.
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2. Definition of "Tax or Duty in which States are Interested": This phrase refers to taxes or
duties whose net proceeds are assigned to any state or for which sums are payable to states
from the Consolidated Fund of India. The "net proceeds" are determined by deducting the
cost of collection. The Comptroller and Auditor-General of India certifies the net proceeds,
and his certification is final.
Borrowing by the state and centres:
1. Centre's Borrowing: The Central government can borrow within India or outside, and
provide guarantees within the limits set by Parliament. However, no specific law has been
enacted by Parliament to fix these limits yet.
2. State's Borrowing: State governments can borrow within India, upon the security of their
Consolidated Fund, or provide guarantees within the limits set by their respective state
legislatures.
3. Central Loans to States: The Central government can lend money to states or provide
guarantees for loans taken by states. Any funds needed for such loans are charged to the
Consolidated Fund of India.
4. Restrictions on State Borrowing: A state cannot borrow without the consent of the Centre if
any part of a loan previously provided by the Centre to the state is still outstanding or if a
guarantee has been given by the Centre for a loan.

Inter-governmental tax immunities

1. Exemption of Central Property from State Taxation:
 Property belonging to the Central government is exempt from all taxes imposed by
states or any authority within a state, such as municipalities or district boards.
However, Parliament has the authority to lift this exemption.
 The term "property" encompasses various assets, both tangible and intangible,
including land, buildings, chattels, shares, and debts, regardless of whether they are
used for sovereign or commercial purposes.
 Corporations or companies established by the Central government are not immune
from state or local taxation because they are considered separate legal entities.
2. Exemption of State Property or Income from Central Taxation:
 Similarly, the property and income of a state are exempt from Central taxation,
regardless of whether they are derived from sovereign or commercial activities.
However, Parliament can tax the commercial operations of a state if it chooses to do
so.
 Parliament has the authority to declare certain trades or businesses as incidental to the
ordinary functions of the government, exempting them from taxation.
 The immunity granted to states regarding Central taxation does not extend to customs
duties or excise duties (advisory opinion 1963)
3. Effects of Emergencies:
 During a national emergency (proclaimed under Article 352), the President can
modify the constitutional distribution of revenues between the Centre and the states.
This may involve reducing or cancelling the transfer of finances, including tax
sharing and grants-in-aid, from the Centre to the states. These modifications remain in
effect until the end of the financial year in which the emergency ends.
 During a financial emergency (proclaimed under Article 360), the Centre can issue
directives to states regarding financial matters. This includes instructing states to
adhere to specified financial principles, reduce salaries and allowances, and reserve
money bills and financial bills for the President's consideration.
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The trends in Centre-state relations in India

have undergone significant changes, particularly since the late 1960s. Here's a summary of the key
developments and tensions:
1. Pre-1967 Era: Centre-state relations were relatively smooth due to one-party rule at the
Centre and in most states, primarily led by the Congress party.
2. Post-1967 Elections: The Congress party faced defeats in nine states, weakening its position
at the Centre. This led to a new era marked by non-Congress governments in states, which
opposed increasing centralization and intervention by the Central government.
3. Tension Areas:
 Mode of appointment and dismissal of governors.
 Discriminatory roles of governors.
 Imposition of President's Rule for partisan interests.
 Deployment of Central forces in states for maintaining law and order.
 Reservation of state bills for the President's consideration.
 Discrimination in financial allocations to states.
 Role of the Planning Commission in approving state projects.
 Management of All-India Services.
 Use of electronic media for political purposes.
 Appointment of enquiry commissions against chief ministers.
 Sharing of finances between Centre and states.
 Encroachment by the Centre on the State List.
4. Efforts for Reform:
 Administrative Reforms Commission (ARC): Formed in 1966, it recommended the
establishment of an Inter-State Council, non-partisan appointments of governors,
delegation of powers to states, and more financial resources for states. However, no
action was taken on its recommendations.
 Rajamannar Committee: Appointed by the Tamil Nadu Government in 1969, it
suggested measures for securing utmost autonomy for states, including the immediate
formation of an Inter-State Council, making the Finance Commission permanent, and
disbanding the Planning Commission. Its recommendations were ignored.
 Anandpur Sahib Resolution: Adopted by the Akali Dal in 1973, it demanded
restricting the Centre's jurisdiction and vesting residuary powers in states to make the
Constitution truly federal.
 West Bengal Memorandum: Published by the West Bengal Government in 1977, it
proposed replacing the word 'union' with 'federal' in the Constitution, confining
Centre's jurisdiction, repealing certain Articles, and allocating 75% of Centre's
revenue to states. These demands were not accepted by the Central government.
The Sarkaria Commission,
appointed in 1983 by the Central government to review Centre-state relations, made several
recommendations to improve the functional aspects of federalism in India. Here's a summary of its
key recommendations:
1. Inter-State Council: Proposed the establishment of a permanent Inter-State Council, named
the Inter-Governmental Council, under Article 263 to facilitate cooperation between the
Centre and states.
2. Use of Article 356 (President’s Rule): Recommended using President's Rule sparingly and
only as a last resort in extreme cases.
3. All-India Services: Advocated for further strengthening the institution of All-India Services
and creating more such services.
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4. Residuary Powers: Suggested that taxation-related residuary powers should remain with
Parliament, while other residuary powers should be placed in the Concurrent List.
5. Communication of Reasons for Withholding Assent: Proposed that when the President
withholds assent to state bills, the reasons should be communicated to the state government.
6. National Development Council (NDC): Recommended renaming and reconstituting the
NDC as the National Economic and Development Council (NEDC).
7. Zonal Councils: Advocated for the reconstitution and reactivation of zonal councils to
promote federalism.
8. Deployment of Armed Forces: Proposed that the Centre should have powers to deploy
armed forces without state consent, but consultation with states is desirable.
9. Consultation on Concurrent List Subjects: Recommended that the Centre should consult
states before making laws on subjects in the Concurrent List.
10. Appointment of State Governor: Suggested that the procedure for consulting the Chief
Minister in the appointment of the state governor should be prescribed in the Constitution.
11. Sharing of Corporation Tax Proceeds: Proposed making the net proceeds of corporation tax
shareable with states.
12. Dismissal of Council of Ministers: Stated that the Governor cannot dismiss the council of
ministers as long as it commands a majority in the assembly.
13. Governor’s Term: Recommended that the Governor's term of five years in a state should not
be disturbed except for compelling reasons.
14. Commission of Enquiry against State Minister: Proposed that no commission of enquiry
should be set up against a state minister unless demanded by Parliament.
15. Surcharge on Income Tax: Suggested that the surcharge on income tax should be levied by
the Centre only for a specific purpose and for a limited period.
16. Role of Finance Commission and Planning Commission: Stated that the current division of
functions between the Finance Commission and Planning Commission is reasonable and
should continue.
17. Implementation of Three-language Formula: Advocated for the uniform implementation of
the three-language formula.
18. Autonomy for Radio and Television: Recommended no autonomy for radio and television
but decentralization in their operations.
19. Role of Rajya Sabha: Proposed no change in the role of Rajya Sabha and Centre's power to
reorganize states.
20. Commissioner for Linguistic Minorities: Recommended activating the Commissioner for
Linguistic Minorities.
The Punchhi Commission,
established in 2007 to review Centre-State relations in India, conducted an extensive examination of
various aspects of federalism. Here are some of its key recommendations:
1. Agreement on Concurrent List Legislation: Before introducing legislation in Parliament on
Concurrent List matters, the Union and states should reach a broad agreement to facilitate
effective implementation of laws.
2. Restraint in Asserting Parliamentary Supremacy: The Union should exercise restraint in
asserting Parliamentary supremacy in matters assigned to the states. Greater flexibility for
states in subjects of the State List and "transferred items" in the Concurrent List is essential
for better Centre-state relations.
3. Limitation on Union's Jurisdiction: The Union should only occupy subjects in concurrent
or overlapping jurisdiction necessary for achieving uniformity of policy in demonstrable
national interest.
Centre-State Relations

4. Continuing Auditing Role for Inter-state Council: The Inter-state Council should have a
continuing auditing role in managing matters in concurrent or overlapping jurisdiction.
5. Time Limit for President's Decision on State Bills: The President should decide on
assenting or withholding assent to a state bill reserved for consideration within six months.
6. Streamlining Procedures for Treaty Making: Parliament should enact legislation on treaty
making (Entry 14 of List I) to streamline procedures involved, ensuring a balanced exercise of
power.
7. Governor Selection Guidelines: Strict guidelines for selecting Governors should be
followed, as recommended in the Sarkaria Commission report, ensuring eminence,
impartiality, and detachment from local politics.
8. Fixed Tenure for Governors: Governors should have a fixed tenure of five years, and their
removal should not be at the sweet will of the Central Government.
9. Impeachment Procedure for Governors: The impeachment procedure for Governors should
mirror that of the President, ensuring due process and accountability.
10. Limitation on Governor's Discretionary Powers: The Governor's discretionary powers
should be limited, ensuring actions are reasoned, based on good faith, and not arbitrary.
11. Guidelines for Chief Minister Appointment in Hung Assembly: Clear guidelines should be
established for Chief Minister appointment in case of a hung assembly, ensuring a transparent
and fair process.
12. Role of Governor in Chief Minister Dismissal: The Governor should insist on the Chief
Minister proving majority in the House within a prescribed time limit in case of a dismissal.
13. Prosecution Sanction by Governor: Governors should have the right to sanction prosecution
of a state minister if the Cabinet decision seems biased.
14. Governors' Role in Universities and Statutory Positions: Governors should refrain from
holding positions beyond their Constitutional role, limiting involvement to Constitutional
provisions.
15. Use of Article 356 in State Emergencies: The imposition of President's Rule should be
strictly limited to rectifying a "failure of Constitutional machinery in the state."
16. Amendment of Article 356: Amendments to Article 356 should incorporate guidelines from
the S.R. Bommai case, ensuring smoother Centre-state relations.
17. Framework for Localized Emergencies: A Constitutional or legal framework for "localized
emergencies" should be established, allowing for Central intervention without invoking
extreme measures.
18. Empowerment of Inter-state Council: Article 263 should be amended to make the Inter-
state Council a credible and powerful mechanism for managing interstate and Centre-state
differences.
19. Strengthening Zonal Councils: Zonal Councils should meet regularly with agendas
proposed by concerned states, maximizing coordination and harmonization of policies.
20. Role of Chief Ministers' Forum: A forum of Chief Ministers, chaired by rotation, can be
established to coordinate policies in sectors like energy, food, education, and health.
21. Creation of New All-India Services: New All-India services should be created in sectors like
health, education, engineering, and judiciary.
22. Equal Representation in Rajya Sabha: The relevant provisions should be amended to give
states equality of seats in the Rajya Sabha, regardless of population size.
23. Devolution of Powers to Local Bodies: The scope of devolution of powers to local bodies
should be constitutionally defined, ensuring self-government.
24. Cost Sharing in Central Legislation: All future Central legislations involving states'
involvement should provide for cost sharing, promoting fiscal responsibility.
Centre-State Relations

25. Revision of Mineral Royalty Rates: Royalty rates on major minerals should be revised
every three years without delay, ensuring fair compensation to states.
26. Removal of Profession Tax Ceiling: The profession tax ceiling should be completely
removed through Constitutional amendment.
27. Review of Revenue Sources: The scope for raising more revenue from taxes mentioned in
Article 268 should be examined afresh.
28. Annual Assessment by Independent Body: Fiscal legislations should provide for annual
assessment by an independent body, ensuring greater accountability.
29. Considerations in Finance Commission ToR: The considerations in the Terms of Reference
of the Finance Commission should be balanced between the Centre and states.
30. Review of Cesses and Surcharges: All existing cesses and surcharges should be reviewed to
reduce their share in gross tax revenue.
31. Coordination between Finance Commission and Planning Commission: Better
coordination between the Finance Commission and Planning Commission is necessary,
ensuring synchronization of periods covered.
32. Conversion of Finance Commission Division: The Finance Commission division in the
Ministry of Finance should be converted into a full-fledged department, serving as the
permanent secretariat for the Finance Commissions.
33. Role of Planning Commission: The Planning Commission's role should focus on
coordination rather than micro-managing sectoral plans.
34. Setting up of Inter-State Trade and Commerce Commission: An Inter-State Trade and
Commerce Commission should be established to promote coordination and decision-making
on interstate trade.