CMs must unite to save federalism

I Mean What I Say

By Shashi Tharoor

5 min read
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What we have repeatedly seen under this government is a clear and clinical effort being made to curtail the autonomy of our states. PM Modi famously talked about the need for cooperative and competitive federalism, but we are witnessing instead the rise of a coercive and combative brand of federalism that seeks to centralize all power at the expense of our states.

M K Stalin speaks during the Budget Session of the State Assembly | ANi

Tamil Nadu Chief Minister M K Stalin made public his letter this week to Chief Ministers of non-BJP-ruled states on the subject of federalism, appealing to them to join him in resisting the encroachments of the Union government. 'As Indian Democracy stands at crossroads, I've written to the CMs of non-BJP ruling states to extend their support to the resolution passed by TNLA [the Tamil Nadu Legislative Assembly] urging the President & Union Govt to fix a time limit for Governors to approve the bills passed by the respective legislatures,' he tweeted.

In the letter, sent on Wednesday, Stalin said: 'The Constitution of India has clearly defined the roles and responsibilities of the Union and State Governments along with the role of the Governor. However, it is observed that such time-tested principles are neither respected nor followed now, affecting the functioning of state governments.' The Governor's delay in clearing Bills brought 'state administrations to a standstill,' Stalin said, adding that his government had made several efforts 'to clarify the doubts and concerns raised by the Governor' and that these had failed.

The resolution passed by the Tamil Nadu Assembly said the Governor had been 'indefinitely withholding many Bills without granting permission... thereby functioning against the welfare of the people of Tamil Nadu'. Stalin added: 'Increasingly we are witnessing the fading away of the spirit of cooperative federalism from the governance of the Nation.' The letter urged other Chief Ministers to also push similar resolutions 'to uphold the sovereignty and self-respect of state governments and legislatures.'

The outreach by Stalin to other Chief Ministers follows his recent initiative bringing together 20 opposition parties for a 'social justice platform' which attracted a plethora of parties at odds with the BJP, including (in alphabetical order), the AAP, CPI, CPI(M), JMM, RJD, Samajwadi and Trinamool Congress. There are other issues calling for the unity of states against the continuing encroachments of the Union. Finance is the most pressing of them.

The Chief Minister's letter could not be more timely, since the recent Finance Bill, passed amid the din in the Lok Sabha by a disrupted (and disrespected) Parliament, had provided further evidence of the erosion of federalism under BJP rule. The Prime Minister has often spoken about the importance of cooperative federalism, but the actions of his government make it clear that in the BJP's idea of New India, some states come first while others must remain subservient to the political wishes of those in New Delhi.

Finance Minister Nirmala Sitharaman | AFP

Finance Minister Nirmala Sitharaman had suggested that resources allocated for states have been sharply increased in the Union Budget -- but the numbers available suggest that this is yet another hollow claim. The unfortunate reality is that the resources being shared with our states have been consistently declining under this government's watch. In 2021-22, transfers to states amounted to Rs 4,60,575 crore. In the next year, this number was reduced substantially to Rs 3,67,204 crore in Budget 2022-23, of which there is a gap of almost 60,000 crores as reflected in the revised estimates. And now there has been a further decrease in the current budget to Rs 3,59, 470 crores for the states, 22% less than in 2021-22.

A similar trend can also be seen when it comes to the devolution of tax revenues to states, which has also been declining under BJP rule. At a time when states are struggling to bear the burden of growing expenditure including significant costs incurred during the pandemic, it is most unfortunate to note that the states' share of tax revenues has come down to only 30.4% in the upcoming Budget, down from 33.2% in 2021-22, and a far cry from the 42% share promised by the 14th Finance Commission. At a time when most states had demanded a clear 50% by way of tax devolution, this government's shocking disregard towards even meeting the lower figure proposed by the Finance Commission has once again placed a disproportionate burden on our states. It represents another attack on the spirit of cooperative federalism that has held India together since her Independence.

What we have repeatedly seen under this government is a clear and clinical effort being made to curtail the autonomy of our states. PM Modi famously talked about the need for cooperative and competitive federalism, but we are witnessing instead the rise of a coercive and combative brand of federalism that seeks to centralize all power at the expense of our states. We have seen this with the unjustified push towards imposing Hindi on the southern states; in the weaponisation of independent regulatory and investigative bodies like the Enforcement Directorate, the CBI and the Income Tax department to clamp down on the government's political opponents from regional parties; the use of legislation like the Disaster Management Act, an obscure provision of which was used to ride roughshod over states' rights in imposing successive lockdowns during the Covid pandemic; in the creation and misuse of the PM CARES fund, which limited the flow of cash to state-run CMDRFs; and the acceleration in the proportion of Central-sponsored schemes, which effectively seeks to reduce states to mere implementing agencies.

Narendra Modi interacts with Tamil Nadu Chief Minister MK Stalin | ANI

One must add to the litany above the growing tendency to undermine the careful balance in our fiscal federalism that previous governments had carefully maintained, so that our states felt empowered to pursue their own priorities. That balance has been disturbed through a number of cynical tools, including the record number of cesses that are currently being levied by the central government, the proceeds of which are not shared with the states. Despite a number of states voicing their protests against the use of centrally levied cess, there has been a rapid expansion in this Union tax dodge. Between 2011-12, the share of cesses and surcharges was 8.16 per cent of gross tax revenue. Under this government, that number has tripled to 28.08 per cent of gross tax revenue (as of the 2021-22 fiscal year) and keeps going up. In terms of total numbers, the amount gathered through cesses and surcharges has doubled from an approximate 2,42,000 crores in 2018 to nearly 5 lakh crores last year.

And if that wasn't bad enough, we also have recurrent instances where the CAG has called out the centre for not using these cesses for specific purposes and leaving a significant proportion of these monies (in some cases as much as 40%) in the Consolidated Fund of India meant for general spending, a clear violation of the rules that govern the utilization of cesses. But this is a government that blithely disregards rules -- except when it seeks to impose them on others. When you look at both the financial handicaps imposed on our states and the underutilization of funds from cesses, one wonders if this is what Prime Minister Modi meant by 'Na Khaunga, Na Khane Dunga'!

Naturally these efforts have left our states feeling disenfranchised and unable to play the role of an equal stakeholder in driving our nation's development trajectory. At a time when they are still responsible for the bulk of expenditure (over 60%) in the country, particularly in areas like education and healthcare, this is unforgivable. Taken together with the behaviour of Governors pointed to by Mr Stalin, federalism is in dire straits indeed. The other Chief Ministers he has approached should unite with him to resist this dangerous trend. Otherwise federalism will become a dead letter in our Constitution.

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