Centre-State Relations under the Constitution
The Constitution of India, with its federal framework, meticulously divides legislative, executive, and financial powers between the Union (Centre) and the states. Notably, it makes no such division for judicial authority, instead establishing a single, integrated judiciary to uniformly enforce both Union and state laws. This unified system ensures consistency and coherence across the nation's legal landscape.
While the Centre holds supremacy in its designated domains and the states in theirs, the success of this federal arrangement hinges on seamless harmony and coordination between them. To foster this, the Constitution incorporates comprehensive provisions that meticulously regulate Centre-state relations across multiple facets.
These relations are broadly categorized into three key areas: legislative relations, administrative relations, and financial relations.
Centre-State Legislative Relations
Part XI of the Indian Constitution, spanning Articles 245 to 255, forms the cornerstone of legislative relations between the Centre and the states, supplemented by additional provisions elsewhere in the document. This framework mirrors the structure of other federal constitutions by carefully dividing legislative authority between the Union and the states across two key dimensions: the geographical territory over which laws apply and the specific subjects they govern.
Beyond this basic division, the Constitution empowers Parliament to enact laws on matters typically reserved for the states during five exceptional circumstances, while also granting the Centre mechanisms to oversee and influence state legislation in select cases. Together, these elements shape a balanced yet flexible system, giving rise to four principal aspects of Centre-state legislative relations: the territorial reach of central and state laws; the allocation of legislative subjects; Parliament's authority to legislate in the state domain; and the Centre's oversight of state legislation.
Territorial Extent of Central and State Legislation
The Indian Constitution delineates the territorial scope of legislative powers for both Parliament and state legislatures with precision, ensuring a balanced federal structure. Parliament holds expansive authority, enabling it to enact laws for the whole of India or any part thereof. This includes all states, union territories, and any other territories currently within India's borders.
In contrast, a state legislature's reach is confined to its own territory: it can legislate for the entire state or any portion of it. Such laws do not extend beyond state boundaries unless a substantial connection—or "nexus"—exists between the state and the subject matter.
Uniquely, Parliament enjoys the exclusive power of extraterritorial legislation. This means its laws can apply to Indian citizens and their property anywhere in the world, transcending national borders.
Yet, the Constitution imposes targeted restrictions on Parliament's otherwise plenary territorial jurisdiction, carving out exceptions in specific regions. For instance, the President may issue regulations for the peace, progress, and good governance of five union territories: Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu, and Ladakh. These regulations carry the full force of a parliamentary act and can even repeal or amend existing acts of Parliament insofar as they relate to these territories.
Further safeguards protect tribal and scheduled areas. A state governor can direct that a parliamentary act either does not apply to a scheduled area within the state or applies only with specified modifications and exceptions. Similar powers extend to tribal areas, or autonomous districts: in Assam, the governor holds this authority; for Meghalaya, Tripura, and Mizoram, it rests with the President. These provisions underscore the Constitution's commitment to regional sensitivities while upholding central legislative primacy.
Distribution of Legislative Subjects
The Indian Constitution establishes a meticulous three-fold distribution of legislative powers between the Centre and the states through the Seventh Schedule. This framework divides subjects into three categories: the Union List (List-I), the State List (List-II), and the Concurrent List (List-III). This arrangement balances national unity with regional autonomy, ensuring that critical areas of governance fall under appropriate jurisdictions.
Parliament holds exclusive legislative authority over matters in the Union List, which currently encompasses 98 subjects—up from an original 97. These include vital national concerns such as defence, banking, foreign affairs, currency, atomic energy, insurance, communications, inter-state trade and commerce, census, and audits. In essence, this list safeguards domains requiring uniform application across the country.
Under normal circumstances, state legislatures wield exclusive powers over the State List, now comprising 59 subjects (originally 66). These cover regional priorities like public order, police, public health and sanitation, agriculture, prisons, local government, fisheries, markets, theatres, and gambling. This allocation allows states to address their unique local needs effectively.
The Concurrent List, with 52 subjects today (originally 47), permits both Parliament and state legislatures to legislate. Key areas include criminal law and procedure, civil procedure, marriage and divorce, population control and family planning, electricity, labour welfare, economic and social planning, drugs, newspapers, books, and printing presses. A significant shift occurred through the 42nd Amendment Act of 1976, which moved five subjects from the State List to the Concurrent List: education, forests, weights and measures, protection of wild animals and birds, and the administration of justice (including the constitution and organization of all courts except the Supreme Court and High Courts). This change enhanced central oversight in these evolving domains.
Beyond these lists, Parliament enjoys additional powers. It can legislate on any State List matter for Union Territories or acquired territories not part of any state. The 101st Amendment Act of 2016 introduced a tailored regime for the Goods and Services Tax (GST): both Parliament and state legislatures may enact laws on GST imposed by the Union or states, but Parliament alone handles inter-state supplies of goods or services. Finally, residuary legislative powers—covering subjects not enumerated in any list, including residuary taxes—vest exclusively with Parliament.
This scheme thoughtfully categorizes subjects: the Union List prioritizes national imperatives demanding uniformity, the State List accommodates regional diversity and local interests, and the Concurrent List strikes a balance where nationwide consistency is desirable yet flexibility is viable. Together, they foster both cohesion and variation.
India's model draws from global precedents but adapts them uniquely. Unlike the United States, where only federal powers are enumerated and residuary powers reside with states, or Australia, which mirrors this single-enumeration approach, India follows a Canadian-inspired double enumeration (Union and State, with residuary powers at the Centre). The Government of India Act, 1935, introduced a three-fold scheme—federal, provincial, and concurrent—but assigned residuary powers to the Governor-General rather than legislatures. The Constitution refines this by vesting them in Parliament, aligning more closely with Canada's structure.
To prevent jurisdictional disputes, the Constitution explicitly affirms the supremacy hierarchy: Union List over State and Concurrent Lists; Concurrent List over State List. In direct conflicts on Concurrent List subjects, central laws prevail over state laws. An important exception applies: if a state law receives the President's assent after being reserved for consideration, it takes precedence within that state—though Parliament can later override it with fresh legislation. This mechanism ensures federal dominance while respecting state initiatives in approved cases.
3. Parliamentary Legislation in the State Field
In ordinary circumstances, the Indian Constitution delineates legislative powers between the Centre and the states through the Union, State, and Concurrent Lists in the Seventh Schedule. However, during extraordinary situations, this distribution can be modified or temporarily suspended. Specifically, Parliament gains the authority to legislate on matters in the State List under five exceptional conditions, ensuring national unity and effective governance when needed.
The first such provision activates when the Rajya Sabha passes a special resolution. If the Upper House, by a two-thirds majority of members present and voting, declares it necessary in the national interest for Parliament to legislate on Goods and Services Tax (GST) or any State List subject, Parliament acquires that competence. This resolution remains effective for one year and can be renewed indefinitely in one-year increments. Laws enacted under it lapse six months after the resolution expires. Notably, states retain their legislative power on the same subject, but in any conflict, the parliamentary law prevails.
A similar mechanism operates during a national emergency. While a proclamation of emergency is in force, Parliament can legislate on State List matters or GST. These laws become inoperative six months after the emergency ends, and again, state laws are not barred—though parliamentary enactments take precedence in case of repugnancy.
Parliament can also step in at the explicit request of states. If the legislatures of two or more states pass resolutions empowering Parliament to enact laws on a State List matter, it may do so, with the law applying only to those requesting states. Other states can later adopt it via their own resolutions. Crucially, this transfers legislative authority entirely to Parliament: states surrender their power, and only Parliament can amend or repeal such laws. Prominent examples include the Prize Competitions Act, 1955; Wild Life (Protection) Act, 1972; Water (Prevention and Control of Pollution) Act, 1974; Urban Land (Ceiling and Regulation) Act, 1976; and Transplantation of Human Organs Act, 1994.
To honour international commitments, Parliament holds unrestricted power to legislate on State List subjects for implementing treaties, agreements, or conventions. This ensures India meets its global obligations without federal constraints. Key instances are the United Nations (Privileges and Immunities) Act, 1947; Geneva Conventions Act, 1960; Anti-Hijacking Act, 1982; and laws on environmental protection and the Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Finally, during President’s Rule in a state—under Article 356—Parliament can legislate on any State List matter specific to that state. Such laws endure beyond the President's Rule period and are not automatically revoked. The state legislature, once restored, can amend, repeal, or re-enact them, restoring its autonomy in due course.
These provisions strike a delicate balance, allowing federal flexibility in crises while safeguarding state rights, embodying the Constitution's federal ethos with unitary safeguards.
4. Centre’s Control Over State Legislation
Beyond Parliament's authority to legislate directly on State List subjects during exceptional circumstances, the Indian Constitution equips the Centre with several mechanisms to oversee state legislatures. These tools ensure coordinated governance while preserving federal balance.
One key instrument involves the Governor, who must reserve specific bills passed by the state legislature for the President's consideration. The President holds an absolute veto over such bills, effectively granting the Centre the final say on matters deemed nationally significant.
Additionally, for bills addressing sensitive topics on the State List—such as those imposing restrictions on the freedom of trade and commerce—prior approval from the President is mandatory before introduction in the state legislature. This precondition prevents potential conflicts with national economic policies.
In times of financial emergency, the Centre can further direct states to reserve all money bills and other financial legislation for the President's review. Together, these provisions underscore the Constitution's deliberate design to position the Union as superior in the legislative domain.
This hierarchy, often termed the rule of federal supremacy, resolves inevitable conflicts between Union and state laws, fostering harmony rather than chaos. As the Sarkaria Commission on Centre-State Relations (1983–88) astutely observed, excluding this principle would invite dire consequences: a two-tier political system crippled by interference, strife, legal confusion, and conflicting laws that bewilder ordinary citizens. Uniformity on core issues of shared concern would erode, undermining the federal ethos of unity in diversity. Ultimately, this rule of Union supremacy remains essential for the federal system's effective operation.
Union-State Administrative Relations
Part XI of the Indian Constitution meticulously outlines the relations between the Union and the states, with Articles 256 to 263 forming the cornerstone of administrative coordination between the Centre and the states. These provisions ensure smooth governance by imposing duties on states to comply with Union directives, facilitating intergovernmental cooperation, and empowering the Centre to issue instructions on executive matters. Complementing this framework, several other articles across the Constitution—such as those on emergencies, financial relations, and dispute resolution—further regulate this essential dimension of federalism.
Distribution of Executive Powers
In India's federal structure, the executive power of the Union and the states mirrors the distribution of legislative powers outlined in the Union List, State List, and Concurrent List of the Seventh Schedule, with only a few exceptions. This alignment ensures a clear division of administrative responsibilities. The Centre's executive authority extends across the entire territory of India in two key areas: first, over matters exclusively reserved for Parliament's legislation under the Union List; and second, in exercising any rights, authority, or jurisdiction granted to it through treaties or agreements. This broad reach allows the Union government to act decisively on national priorities like defense, foreign affairs, and currency.
In contrast, a state's executive power is confined to its own territorial limits and applies primarily to subjects in the State List, where the state legislature holds exclusive legislative authority—think public health, agriculture, or police. For matters in the Concurrent List, where both Parliament and state legislatures can legislate, executive responsibility defaults to the states. Even when Parliament enacts a law on such a subject, the states are typically tasked with its implementation, unless the Constitution explicitly provides otherwise or Parliament directs the Centre to take over. This principle underscores the federal ethos, empowering states as the primary executors of shared laws while preserving the Union's overriding role when needed.
Obligations of States and the Centre
The Indian Constitution imposes two key restrictions on the executive power of states, ensuring the Centre can exercise its authority freely and effectively. First, state executives must operate in a manner that fully complies with laws enacted by Parliament and any existing laws applicable within the state. Second, they must refrain from any actions that obstruct or undermine the Centre's executive functions in that state. While the first restriction establishes a broad duty of adherence, the second specifically prohibits interference with central operations.
To enforce these obligations, the Centre holds the power to issue binding directions to states as needed. These directives carry a coercive edge: under Article 365, failure by a state to comply with or implement central directions allows the President to declare that constitutional governance in the state has broken down. This paves the way for imposing President's Rule under Article 356, underscoring the Constitution's design to maintain national unity through central oversight.
Centre’s Directions to the States
Beyond the scenarios already discussed, the Union government possesses clear authority under the Constitution to issue binding directions to states on how they exercise their executive powers. These directives target four key areas essential to national unity and welfare.
First, states must construct and maintain critical means of communication—such as roads, bridges, or waterways—designated as vital for national or military purposes. Second, they are required to adopt specific measures for protecting railways operating within their territories, ensuring seamless national connectivity and security. Third, states must provide adequate facilities for primary education in the mother tongue of children from linguistic minority groups, fostering inclusivity and cultural preservation. Finally, they have to prepare and implement targeted schemes for the welfare of Scheduled Tribes, addressing their unique socio-economic needs.
What makes these instructions particularly enforceable is the coercive mechanism outlined in Article 365. If a state fails to comply, the President may hold that body politic in default, potentially triggering President's Rule and central intervention. This provision underscores the Centre's overriding role in matters of national importance.
Mutual Delegation of Functions
India's Constitution establishes a rigid division of legislative powers between the Centre and the states, preventing the Centre from delegating its authority to a state or allowing a single state to request Parliament to legislate on a state subject. Executive powers generally mirror this legislative distribution. However, such inflexibility in administration could spark conflicts or deadlocks, so the Constitution introduces a mechanism for mutual delegation of executive functions to promote cooperation and smooth governance.
Under this provision, the President, with the state government's consent, can entrust any of the Centre's executive functions to that state. In the reverse scenario, a state's governor, with the Central government's approval, can delegate state executive functions to the Centre. These delegations can be either conditional or unconditional, fostering flexibility without altering the underlying power structure.
The Constitution further allows the Centre to impose executive functions on a state without its consent—but only through parliamentary legislation, not presidential action. Specifically, a parliamentary law on a Union List subject can confer powers and duties on a state or authorize the Centre to do so, bypassing state agreement. States, however, lack this unilateral power; their legislatures cannot impose functions on the Centre.
In essence, mutual delegation occurs either through consensual agreements or parliamentary laws. While the Centre enjoys both options, states are limited to agreements alone, ensuring Centre-state harmony while preserving federal balance.
Cooperation Between the Centre and the States
The Indian Constitution fosters harmony and coordination between the Centre and the states through a series of targeted provisions, ensuring smooth governance across federal lines. One key mechanism addresses disputes over shared resources: Parliament holds the power to adjudicate any conflicts or complaints regarding the use, distribution, and control of waters from inter-state rivers and river valleys. This provision prevents escalations that could disrupt regional development.
To promote ongoing dialogue, the President may establish an Inter-State Council under Article 263. This body investigates subjects of mutual interest between the Centre and states, facilitating discussion and resolution. In practice, such a council was indeed set up in 1990, serving as a vital forum for cooperative federalism.
Mutual recognition further strengthens ties. Under the Constitution, full faith and credit must be accorded throughout India to the public acts, records, and judicial proceedings of both the Centre and every state. This ensures that decisions made in one part of the country are respected nationwide, minimizing legal friction.
Finally, Parliament can appoint a dedicated authority to implement constitutional guarantees on inter-state freedom of trade, commerce, and intercourse. Although this step would streamline economic integration, no such authority has been constituted to date. Together, these measures underscore the framers' vision of a collaborative federal structure.
All-India Services
In India's federal structure, the Union and state governments maintain their own distinct public services—known as Central Services and State Services, respectively. Complementing these are the All-India Services: the Indian Administrative Service (IAS), Indian Police Service (IPS), and Indian Forest Service (IFS). Officers from these elite cadres hold pivotal positions at both central and state levels, rotating between them in a seamless cycle of service. Recruited and trained centrally by the Union Public Service Commission, they embody a unified administrative backbone for the nation.
Control over these services is shared between the Centre and the states, with day-to-day supervision resting with state governments and final authority vested in the Union government. This arrangement traces its roots to the post-independence era: in 1947, the colonial Indian Civil Service (ICS) evolved into the IAS, while the Indian Police (IP) gave way to the IPS, both enshrined as All-India Services by the Constitution. The IFS joined as the third pillar in 1966. Under Article 312, Parliament holds the power to establish additional All-India Services, provided the Rajya Sabha passes a resolution affirming the need, typically in the interest of national unity.
Despite their allocation across states, these three services constitute a single, integrated cadre nationwide. All officers enjoy identical rights, status, and pay scales, fostering consistency regardless of posting. Critics argue that this central dominance encroaches on state autonomy and federal principles by limiting states' patronage over key appointments. Yet, proponents counter that the system upholds administrative excellence at all levels, ensures a uniform framework across diverse regions, and promotes collaboration, coordination, and joint action between the Centre and states on shared concerns.
Defending this model in the Constituent Assembly, Dr. B.R. Ambedkar emphasized its necessity in a federal setup. "The dual polity which is inherent in a federal system," he noted, "is followed in all federations by a dual service. In all federations, there is a Federal Civil Service and a State Civil Service. The Indian federation, though a dual polity, will have a dual service, but with one exception. It is recognised that in every country there are certain posts in its administrative set up which might be called strategic from the point of view of maintaining the standard of administration. There can be no doubt that the standard of administration depends upon the calibre of the civil servants who are appointed to the strategic posts. The Constitution provides that without depriving the states of their rights to form their own civil services, there shall be an all-India service, recruited on an all-India basis with common qualifications, with uniform scale of pay and members of which alone could be appointed to those strategic posts throughout the Union." This vision underscores the All-India Services as a pragmatic safeguard for India's administrative integrity.
Centre-State Relations in Public Service Commissions
The Indian Constitution delineates clear Centre-state dynamics in the realm of public service commissions, ensuring a balance between state autonomy and central oversight. These provisions promote efficiency in recruitment while safeguarding independence.
For State Public Service Commissions (SPSCs), the Governor appoints the Chairman and members, but their removal rests solely with the President. This mechanism underscores central authority in maintaining the integrity of these bodies.
In cases where multiple states seek coordinated recruitment, Parliament may establish a Joint State Public Service Commission (JSPSC) upon the request of the concerned state legislatures. The President then appoints its Chairman and members, fostering inter-state collaboration without compromising constitutional roles.
The Union Public Service Commission (UPSC) plays a supportive role for states as well. It can extend its services to meet a state's needs if requested by the Governor and approved by the President. Additionally, when two or more states make such a request, the UPSC assists in designing and implementing joint recruitment schemes for positions requiring specialized qualifications, streamlining processes across boundaries.
India's Integrated Judicial System
Despite India's federal structure featuring a dual polity—with separate central and state governments—the administration of justice operates through a unified framework. The Constitution establishes an integrated judicial system, placing the Supreme Court at its apex and the High Courts of the states immediately below it. This singular hierarchy of courts ensures uniform enforcement of both central and state laws, effectively eliminating variations in procedural remedies across regions and fostering national consistency in legal outcomes.
High Court judges are appointed by the President after consulting the Chief Justice of India and the relevant state governor. The President also holds the authority to transfer these judges between High Courts or remove them, safeguarding the system's cohesion and accountability.
To further streamline this structure, Parliament may create a common High Court serving two or more states. Notable examples include the Bombay High Court, shared by Maharashtra and Goa, and the Punjab and Haryana High Court, which caters to both those states. This provision adapts the judiciary flexibly to India's diverse federal landscape while preserving its integrated character.
Relations During Emergencies
The Indian Constitution equips the Union government with extraordinary powers during emergencies, allowing it to override normal federal arrangements and assert control over states. These provisions ensure national unity and stability but are carefully delineated to prevent abuse.
Under a national emergency proclaimed pursuant to Article 352, the Centre gains the authority to issue executive directions to any state on any subject. This effectively places state governments under the Union's complete oversight, without suspending them outright. State executives continue to function, but their autonomy yields to central directives, underscoring the temporary centralization of power.
In contrast, when President's Rule is imposed on a state under Article 356—typically due to a breakdown of constitutional machinery—the President directly assumes all functions of the state government. This includes the powers vested in the Governor or any other state executive authority. The state legislature may be dissolved or suspended, marking a more invasive intervention than during a national emergency.
Finally, a financial emergency under Article 360 empowers the Centre to issue binding instructions to states on fiscal discipline. States must adhere to canons of financial propriety, and the Union can mandate measures such as salary reductions for state employees, ensuring economic stability across the federation during severe monetary crises.
Centre's Oversight over State Administration: Key Constitutional Provisions
Beyond the explicit mechanisms of President's Rule and financial controls, the Indian Constitution embeds several subtle yet powerful provisions that reinforce the Centre's authority over state administration. These ensure national unity while preserving federal balance.
A cornerstone is Article 355, which casts a dual obligation on the Union government: first, to safeguard every state from external aggression and internal disturbance; second, to guarantee that each state's government functions in harmony with constitutional mandates. This article empowers the Centre to intervene proactively, framing state stability as a national imperative.
The Governor's role further exemplifies this dynamic. Appointed by the President and serving at the President's pleasure, the Governor is not merely the ceremonial head of state but also an effective agent of the Centre. Tasked with monitoring state affairs, the Governor routinely submits reports to the Union government, providing real-time insights into administrative performance and potential issues.
Complementing this, the State Election Commissioner—appointed by the Governor—enjoys security of tenure unique to the federal structure: removal rests solely with the President. This provision underscores the Centre's ultimate oversight over even routine electoral processes at the state level, preventing local excesses from undermining democratic integrity.
Extra-Constitutional Devices
Beyond the formal constitutional mechanisms, India employs several extra-constitutional devices to foster cooperation and coordination between the Centre and the states. These primarily consist of advisory bodies and periodic conferences convened at the national level, serving as vital platforms for dialogue and consensus-building on shared concerns.
Among the key non-constitutional advisory bodies is the NITI Aayog, which replaced the erstwhile Planning Commission to drive cooperative federalism through strategic policy formulation. Others include the National Integration Council, which promotes national unity; the Central Council of Health and Family Welfare; the Central Council of Local Government; the Zonal Councils and the North-Eastern Council, focused on regional development; the Central Council of Indian Medicine; the Central Council of Homoeopathy; the Transport Development Council; and the University Grants Commission, among several more. These forums enable informal yet influential exchanges between central and state representatives.
Complementing these are regular conferences that facilitate consultation on diverse issues, held annually or as needed. Prominent examples include the Governors’ Conference, presided over by the President; the Chief Ministers’ Conference, chaired by the Prime Minister; the Chief Secretaries’ Conference, led by the Cabinet Secretary; the Conference of Inspectors-General of Police; the Chief Justices’ Conference, under the Chief Justice of India; the Conference of Vice-Chancellors; the Home Ministers’ Conference, presided over by the Union Home Minister; and the Law Ministers’ Conference, headed by the Union Law Minister. Together, these gatherings strengthen intergovernmental ties through candid discussions and collaborative problem-solving.
Financial Relations Between the Centre and States
Part XII of the Indian Constitution, spanning Articles 268 to 293, forms the cornerstone of financial relations between the Union (Centre) and the states. These provisions meticulously outline the distribution of revenues, taxes, grants, and borrowing powers in India's federal framework. Complementing them are several other constitutional clauses scattered across the document that further refine this fiscal interplay. Together, these elements create a comprehensive system, best understood when organized under the following key heads:
Allocation of Taxing Powers
The Indian Constitution meticulously divides taxing powers between the Centre and the states to maintain fiscal federalism. Parliament holds exclusive authority to levy taxes on the 13 subjects listed in the Union List, such as income tax and customs duties. Similarly, state legislatures exercise exclusive power over the 18 taxes enumerated in the State List, including taxes on agricultural income and land revenue. Notably, the Concurrent List contains no tax entries, meaning neither level of government shares jurisdiction in tax legislation.
This framework saw a significant change with the 101st Constitutional Amendment Act, 2016, which introduced the Goods and Services Tax (GST). This amendment granted concurrent powers to both Parliament and state legislatures to enact laws on GST, creating a unified tax regime across the country. Residuary taxing powers—covering taxes not mentioned in any list—rest exclusively with Parliament. Under this provision, it has imposed taxes like the gift tax, wealth tax, and expenditure tax.
Beyond this division, the Constitution distinguishes between the power to levy and collect a tax and the power to appropriate its proceeds. For instance, while the Centre levies and collects income tax, the revenue is shared between the Centre and states, ensuring equitable distribution.
To prevent overreach, the Constitution imposes specific restrictions on state taxing powers. First, states may levy a tax on professions, trades, callings, and employment, but the annual liability for any individual cannot exceed â‚ą2,500. Second, states are barred from taxing the supply of goods or services (or both) if the transaction occurs outside the state or during import/export. Parliament determines the principles for identifying such inter-state or international supplies.
Additional curbs apply to electricity and water-related taxes. States can tax the consumption or sale of electricity, but not if it is consumed by the Centre or sold to it, nor for electricity used in the construction, maintenance, or operation of railways by the Centre or railway companies. Likewise, while states may tax water or electricity stored, generated, consumed, distributed, or sold by any parliamentary authority regulating inter-state rivers or valleys, such state laws must be reserved for the President's consideration and receive presidential assent to take effect. These safeguards balance state autonomy with national interests.
Distribution of Tax Revenues
The 80th Amendment Act, 2000, and the 101st Amendment Act, 2016, marked pivotal shifts in how tax revenues are shared between the Centre and the states in India. These reforms streamlined the fiscal federalism enshrined in the Constitution, balancing central authority with state autonomy while adapting to evolving economic needs.
Enacted to implement the 10th Finance Commission's recommendations, the 80th Amendment introduced the 'Alternative Scheme of Devolution'. Under this scheme, 29% of the net proceeds from select central taxes and duties—bringing corporation tax and customs duties on par with income tax (excluding agricultural income)—were allocated to the states. Effective retrospectively from 1 April 1996, it unified the sharing mechanism for these revenues, ensuring a more equitable and predictable distribution.
The 101st Amendment, by contrast, ushered in the Goods and Services Tax (GST) regime, creating a unified indirect tax framework. It granted concurrent powers to Parliament and state legislatures to levy GST on supplies of goods and services, replacing a patchwork of taxes that caused cascading effects and fragmented markets. Central levies subsumed included central excise duty, additional excise duties (including those under the Medicinal and Toilet Preparations Act, 1955), service tax, additional customs duty (countervailing duty), special additional duty of customs, and related surcharges and cesses. On the state side, it absorbed value-added tax/sales tax, entertainment tax (except local body levies), central sales tax, octroi and entry tax, purchase tax, luxury tax, taxes on lotteries/betting/gambling, and pertinent state surcharges and cesses. The amendment also repealed Article 268A and Entry 92C of the Union List—introduced by the 88th Amendment Act, 2003—which had enabled the Centre to levy service tax, with proceeds shared between the Centre and states.
Following these amendments, the contemporary framework for tax revenue distribution rests on distinct constitutional categories, each governed by specific articles.
Under Article 268, the Centre levies stamp duties on instruments like bills of exchange, cheques, promissory notes, insurance policies, and share transfers, but these proceeds are collected and fully appropriated by the states where levied, bypassing the Consolidated Fund of India.
Article 269 covers taxes levied and collected by the Centre but wholly assigned to states, such as those on inter-state sales or purchases of goods (excluding newspapers) and consignments of goods. Parliament determines the allocation principles, and these net proceeds too are excluded from the Consolidated Fund.
For inter-state supplies, Article 269A empowers the Centre to levy and collect GST, with proceeds divided between the Centre and states as recommended by the GST Council. Parliament also sets rules for determining the place of supply.
The broadest category, under Article 270, encompasses most Union List taxes and duties levied and collected by the Centre—excluding those under Articles 268, 269, and 269A, surcharges under Article 271, and specific-purpose cesses—with net proceeds shared between the Centre and states. The President prescribes the distribution formula on the Finance Commission's advice.
Article 271 allows Parliament to impose surcharges on taxes under Articles 269 and 270, with all proceeds retained exclusively by the Centre; states receive no share. Notably, GST is exempt from such surcharges.
Finally, states enjoy exclusive rights to levy, collect, and retain 18 taxes listed in the State List. These include land revenue; taxes on agricultural income; succession and estate duties on agricultural land; taxes on lands, buildings, and mineral rights; excise duties on alcoholic liquors, opium, hemp, and narcotics (excluding medicinal preparations); taxes on electricity sales/consumption; taxes on petroleum products, diesel, petrol, natural gas, aviation fuel, and liquor (excluding inter-state/international trade); taxes on road/inland waterway transport of goods/passengers; vehicle taxes; taxes on animals and boats; tolls; profession/trade/employment taxes; capitation taxes; entertainment/amusement taxes levied by panchayats/municipalities/regional or district councils; stamp duties on state-specified documents; and fees on State List matters (excluding court fees). This division underscores India's cooperative federalism, where fiscal resources align with governance responsibilities.
Distribution of Non-Tax Revenues
Non-tax revenues represent a vital stream of income for both the Centre and the States in India's fiscal framework, derived primarily from commercial operations, public services, and other non-fiscal activities rather than taxation. These revenues are distinctly allocated based on constitutional responsibilities, ensuring each level of government taps into sources aligned with its domain.
For the Centre, the major contributors include receipts from Posts and Telegraphs, Railways, banking operations, broadcasting services, coinage and currency management, profits from central public sector enterprises, escheats and lapses, along with various other miscellaneous sources. These reflect the Union's expansive role in national infrastructure, financial systems, and communication networks.
In contrast, the States draw their principal non-tax revenues from irrigation projects, forest resources, fisheries, state public sector enterprises, escheats and lapses, and other sundry receipts. This structure underscores the States' focus on agriculture-linked assets, natural resources, and regional economic ventures, complementing the Centre's broader mandate.
Grants-in-Aid to the States
Beyond the division of tax revenues between the Centre and the states, the Indian Constitution establishes a vital mechanism for financial support: grants-in-aid from central resources. These grants fall into two primary categories—statutory grants and discretionary grants—each serving distinct purposes in bolstering state finances.
Statutory grants, authorized under Article 275, allow Parliament to provide financial assistance to states in need, without extending it uniformly to all. Parliament can tailor the amounts to individual states' requirements, and these sums are charged annually to the Consolidated Fund of India. In addition to this general provision, the Constitution specifies grants for targeted objectives, such as promoting the welfare of Scheduled Tribes or elevating administrative standards in Scheduled Areas, including those in Assam. Crucially, all grants under Article 275—whether general or specific—are disbursed only on the recommendations of the Finance Commission, ensuring an impartial and needs-based allocation.
In contrast, discretionary grants under Article 282 offer greater flexibility. This provision empowers both the Centre and states to make grants for any public purpose, regardless of whether it falls within their legislative domains. The Centre frequently uses this to support states, with no legal obligation to do so—the decision rests entirely at its discretion. These grants serve a dual role: providing fiscal relief to help states meet their development plan targets, and enabling the Centre to guide and harmonize state actions in alignment with national priorities.
The Constitution once included a third, temporary category of grants to address specific economic challenges. For instance, states like Assam, Bihar, Orissa, and West Bengal received payments in lieu of export duties on jute and jute products. These were charged to the Consolidated Fund of India, recommended by the Finance Commission, and limited to ten years from the Constitution's commencement, after which they lapsed.
The Goods and Services Tax Council
The seamless administration of India's Goods and Services Tax (GST) hinges on close cooperation between the central government and the states. To foster this essential coordination, the 101st Constitutional Amendment Act, 2016, established the GST Council as a dedicated consultative body.
Under Article 279A, the President is empowered to constitute the Council through a simple executive order. Serving as a collaborative platform uniting the Centre and all states, the GST Council provides binding recommendations on key aspects of GST implementation. These include:
- The taxes, cesses, and surcharges imposed by the Centre, states, or local bodies that would be subsumed into GST.
- The goods and services subject to GST, or those exempted from it.
- Model GST laws, principles governing the levy of tax, the apportionment of GST on interstate supplies, and rules determining the place of supply.
- The turnover threshold below which goods and services remain exempt from GST.
- GST rates, including floor rates and applicable bands.
- Any special rates for a limited period to mobilize extra resources during natural calamities or disasters.
This structured framework ensures consensus-driven decisions, balancing federal dynamics while streamlining India's unified tax regime.
Finance Commission under Article 280
Article 280 of the Indian Constitution establishes the Finance Commission as a quasi-judicial body, tasked with fostering fiscal harmony between the Centre and the states. Appointed by the President every five years—or earlier if circumstances demand—the Commission submits recommendations on critical aspects of resource sharing, ensuring equitable distribution in India's federal structure.
Its primary mandate includes advising on the division of net tax proceeds between the Union and the states, as well as the specific shares allocated among the states themselves. It also outlines principles governing grants-in-aid from the Centre to the states, drawn from the Consolidated Fund of India. Following the 73rd and 74th Constitutional Amendments, the Commission further recommends measures to bolster a state's Consolidated Fund, enabling it to support local bodies like panchayats and municipalities based on the findings of the respective State Finance Commission. Additionally, the President may refer any other matters related to sound public finance.
Historically, until 1960, the Commission also determined compensatory payments to Assam, Bihar, Orissa, and West Bengal in place of their share in export duties on jute and jute products. Envisaged by the Constitution as the "balancing wheel" of fiscal federalism, the Finance Commission plays a pivotal role in mitigating vertical and horizontal fiscal imbalances, safeguarding cooperative governance.
Bills Affecting States Financial Interests
To safeguard the financial interests of states, the Indian Constitution mandates that certain bills can only be introduced in Parliament on the prior recommendation of the President. This provision ensures that states have a voice in matters that directly impact their revenues or resource allocation. Specifically, it covers four key categories: bills that impose or vary any tax or duty in which states have a stake; bills that alter the definition of "agricultural income" as used in income tax laws; bills that modify the principles governing the distribution of funds to states; and bills that levy a surcharge on specified taxes or duties solely for the benefit of the Union government.
The phrase "tax or duty in which states are interested" is precisely defined in the Constitution. It refers to either (a) a tax or duty where the whole or part of its net proceeds are assigned directly to a state, or (b) a tax or duty whose net proceeds serve as the basis for payments, drawn from the Consolidated Fund of India, to any state.
For clarity, "net proceeds" means the total collections from a tax or duty, minus the costs of collection. These net proceeds for any given area are calculated and certified by the Comptroller and Auditor-General of India (CAG), whose certificate stands as final and binding. This mechanism promotes transparency and fairness in federal fiscal relations.
Borrowing by the Centre and the States
The Indian Constitution establishes precise rules for the borrowing powers of the Central government and the states, balancing fiscal autonomy with oversight to maintain national financial stability.
The Central government holds expansive authority in this domain. It may borrow money from within India or abroad, secured against the Consolidated Fund of India, or issue guarantees on such borrowings—provided these actions stay within limits prescribed by Parliament. Interestingly, Parliament has not yet passed any law to define these limits.
States, by comparison, operate under narrower constraints. A state government can borrow only within India, using the security of its Consolidated Fund of the State, or extend guarantees, all subject to ceilings set by its own legislature. Crucially, states lack permission to borrow from foreign sources.
The Centre also plays a supportive role by extending loans to states or guaranteeing their loans, with the required funds charged directly to the Consolidated Fund of India.
One vital safeguard prevents states from overextending: a state cannot raise any new loan without the Centre's explicit consent if part of an earlier Central loan remains unpaid or if a Central guarantee on a prior state borrowing is still active. This provision underscores the Centre's supervisory role in state finances.
Inter-Governmental Tax Immunities
Federal constitutions worldwide, including India's, embody the principle of immunity from mutual taxation to prevent one tier of government from taxing the other. This safeguard maintains fiscal autonomy and avoids overlapping burdens. The Indian Constitution duly incorporates this rule through targeted provisions, ensuring a balanced division of taxing powers between the Union and the states.
Exemption of Central Property from State Taxation
Under the Indian Constitution, all property owned by the Central government enjoys a blanket exemption from taxes levied by states or any local authorities within them, such as municipalities, district boards, or panchayats. This protection underscores the principle of fiscal federalism, ensuring that state impositions do not encroach on central assets. However, Parliament holds the authority to lift this exemption through legislation, providing flexibility where needed.
The term "property" here is interpreted expansively, encompassing lands, buildings, chattels, shares, debts—essentially anything with monetary value. It covers both movable and immovable assets, as well as tangible and intangible ones, regardless of their purpose. Whether deployed for sovereign functions, like maintaining armed forces installations, or commercial ventures, such central property remains shielded from state taxation.
Notably, this immunity does not extend to corporations or companies established by the Central government. These entities operate as distinct legal persons, separate from the Union, and thus remain fully liable to state and local taxes on their own properties and operations. This distinction preserves the autonomy of such bodies while upholding the broader exemption for direct central holdings.
Exemption of State Property or Income from Central Taxation
Under India's federal framework, the property and income of a state enjoy broad immunity from Central taxation. This protection applies regardless of whether the revenue stems from sovereign functions, such as law enforcement or public administration, or from commercial activities like running enterprises. However, Parliament holds the power to override this exemption for a state's commercial operations, allowing the Centre to impose taxes on them through specific legislation. Notably, Parliament may also designate certain trades or businesses as incidental to the government's core functions, thereby shielding them from Central taxes.
This immunity does not extend to entities below the state level. For instance, the property and income of local authorities—such as municipalities or panchayats—located within a state remain fully subject to Central taxation. The same principle applies to corporations or companies owned or controlled by a state; the Centre retains the authority to tax their operations without restriction.
A landmark clarification came from the Supreme Court in its 1963 advisory opinion, which ruled that a state's tax immunity does not cover customs duties or excise duties. Consequently, the Centre can levy customs duties on goods imported or exported by a state, as well as excise duties on goods produced or manufactured by it, ensuring the Union's fiscal powers remain robust in these key areas.
Centre-State Fiscal Relations During Emergencies
During emergencies, the financial relations between the Centre and the states—which follow a structured framework in normal times, as outlined earlier—undergo profound shifts. These changes reshape fiscal dynamics and resource allocation in critical ways, as detailed below.
National Emergency and Financial Powers
During a National Emergency proclaimed under Article 352, the President acquires sweeping authority to reshape the constitutional distribution of revenues between the Centre and the States. This includes the flexibility to reduce or entirely suspend key financial transfers—such as tax revenue sharing and grants-in-aid—from the Centre to the States. These adjustments, designed to prioritize national needs amid crisis, persist until the end of the financial year in which the emergency is lifted, ensuring a structured return to normal fiscal federalism.
Financial Emergency
Under Article 360 of the Indian Constitution, the President may proclaim a Financial Emergency if the financial stability or credit of India—or any part of its territory—is threatened. Once such a proclamation takes effect, the Union government acquires sweeping powers to direct the states on fiscal matters. These directives can compel states to adhere strictly to canons of financial propriety, ensuring disciplined public spending. They may also mandate reductions in salaries and allowances for all persons serving in connection with state affairs, promoting austerity during crisis. Finally, every Money Bill and other financial Bill passed by a state legislature must be reserved for the President's consideration, allowing central oversight to safeguard national interests.
Trends in Centre-State Relations
Until 1967, Centre-State relations in India remained largely harmonious, thanks to the dominance of the Congress party both at the Centre and in most states. This one-party rule fostered cooperation and minimized friction, allowing for a relatively seamless federal dynamic.
The landmark 1967 general elections marked a turning point. Congress suffered defeats in nine states, while its position at the Centre also weakened considerably. This shift in the political landscape ushered in a new era of Centre-State relations, characterized by growing discord. Non-Congress governments in the states began to challenge what they saw as excessive centralization and overreach by the Union government. Articulating demands for greater state autonomy, they sought enhanced powers and financial resources to bolster their governance. These assertions inevitably led to heightened tensions and conflicts between the Centre and the states.
Tension Areas in Centre-State Relations
Centre-state relations in India have long been fraught with tensions, stemming from the constitutional imbalance of power that often tilts toward the Union government. Key flashpoints include the appointment and dismissal of governors, whose roles have frequently been marred by allegations of partisanship and bias against opposition-ruled states. Governors have also been accused of discriminatory actions, such as delaying or blocking state legislation. A particularly contentious issue has been the imposition of President’s Rule under Article 356, often invoked for political gain rather than genuine constitutional breakdowns. Similarly, the deployment of central forces to manage law and order in states has raised concerns over federal overreach.
Financial matters have fueled further discord, with states protesting discriminatory allocations of funds, the Planning Commission’s overriding authority in approving state projects, and unequal sharing of revenues between the Centre and states. The management of All-India Services—such as the IAS, IPS, and IFS—has sparked disputes over cadre control and transfers, while the Centre’s use of electronic media for partisan propaganda and the appointment of enquiry commissions targeting chief ministers have eroded trust. Compounding these grievances is the Centre’s tendency to encroach on the exclusive State List through legislation or executive fiat, alongside the practice of reserving state bills for the President’s consideration, which states view as an undue veto power.
These frictions in Centre-state dynamics have simmered since the mid-1960s, prompting sustained efforts to address them. In this context, several significant developments have unfolded:
ARC Report on Centre-State Relations
In 1966, the Central Government constituted the Administrative Reforms Commission (ARC), a six-member panel initially chaired by Morarji Desai and later by K. Hanumanthaiya. Tasked with a broad review of administrative machinery, the ARC specifically examined Centre-State relations to address longstanding tensions in India's federal structure.
To probe these issues in depth, the Commission appointed a study team under the leadership of M.C. Setalvad. Building on the team's detailed findings, the ARC submitted its comprehensive report in 1969, proposing 22 reforms to foster healthier Centre-State dynamics. Among the most significant were the establishment of an Inter-State Council under Article 263 of the Constitution as a forum for cooperative federalism; the selection of Governors from individuals with extensive public life experience and a non-partisan stance; extensive delegation of powers to States; greater transfer of financial resources to minimize their fiscal dependence on the Centre; and clear protocols for deploying Central armed forces in States, whether at their request or otherwise.
Regrettably, the Central Government implemented none of these forward-looking recommendations, allowing key opportunities for federal reform to lapse.
Rajamannar Committee on Centre-State Relations
In 1969, amid growing demands for greater state autonomy, the Tamil Nadu government under the Dravida Munnetra Kazhagam (DMK) constituted the Rajamannar Committee, chaired by Dr. P.V. Rajamannar. This three-member panel was tasked with a comprehensive review of Centre-state relations and recommending constitutional amendments to maximize states' independence. The committee submitted its report in 1971, offering a pointed critique of India's federal structure.
The panel pinpointed several factors fueling the country's drift toward centralization, or "unitary trends." These included specific constitutional provisions granting the Centre overriding powers; prolonged one-party dominance at both national and state levels; states' chronic shortage of fiscal resources, leading to heavy reliance on central grants; and the expansive role of the Planning Commission in centralized economic planning.
Among its bold recommendations, the committee urged the immediate establishment of an Inter-State Council to foster cooperative federalism. It proposed transforming the Finance Commission into a permanent body for ongoing fiscal equity, while scrapping the Planning Commission in favor of a leaner statutory alternative. To curb central overreach, it called for the outright deletion of Articles 356, 357, and 365—provisions enabling President's Rule—and the removal of the clause allowing governors to dismiss state ministries at will. Further, it advocated shifting select subjects from the Union and Concurrent Lists to the State List, vesting residuary powers with states, and abolishing All-India Services like the IAS, IPS, and IFS to reduce centralized control over administration.
The Central government, however, dismissed the report entirely, with its recommendations finding no traction in policy or constitutional discourse.
Anandpur Sahib Resolution
In 1973, the Akali Dal—a prominent Sikh political party—passed a significant resolution at a gathering in Anandpur Sahib, a sacred site in Punjab. Officially known as the Anandpur Sahib Resolution, this document blended political and religious aspirations, reflecting growing regional sentiments in the state.
At its core, the resolution called for a radical restructuring of India's federal framework. It urged that the central government's authority be confined strictly to defence, foreign affairs, communications, and currency, with all residuary powers—those not explicitly assigned to the Centre—transferred to the states. To achieve a "true federal" Constitution, it further demanded equal authority and representation for every state at the national level, aiming to empower states as equal partners rather than subordinates. This bold vision highlighted tensions between central dominance and regional autonomy during a pivotal era in Indian politics.
1977 Memorandum on Centre-State Relations
In 1977, the Communist-led government of West Bengal took a bold stand on India's federal structure by submitting a comprehensive memorandum on Centre-state relations to the Central government. This document articulated a vision for a more decentralized polity, reflecting growing regional aspirations amid the political flux following the Emergency.
Key among its recommendations was replacing the word "Union" in the Constitution with "Federal" to emphasize a true federation. The Centre's jurisdiction, it argued, should be strictly limited to defence, foreign affairs, currency, communications, and economic coordination, with all other subjects—including residuary powers—transferred to the states. To prevent perceived overreach, the memorandum urged the repeal of Articles 356 and 357 (governing President's Rule) and Article 360 (financial emergency). It also demanded states' consent for creating new states or reorganizing existing ones, a 75 percent share of the Centre's total revenue for states, equal powers for the Rajya Sabha and Lok Sabha, and the abolition of All-India services in favor of purely Central and state services.
The Central government, however, firmly rejected these demands, underscoring the enduring tensions in India's federal framework.
Sarkaria Commission
In 1983, the Central government constituted the Sarkaria Commission—a three-member panel chaired by R.S. Sarkaria, a retired Supreme Court judge—to examine Centre-state relations across all spheres. Tasked with reviewing existing arrangements and suggesting reforms, the commission received an initial one-year deadline, which was extended four times. It finally submitted its comprehensive report in 1988.
The commission affirmed the robustness of India's constitutional framework and institutions, rejecting demands for sweeping structural overhauls. Instead, it advocated targeted improvements in operational and functional aspects. Viewing federalism not as a rigid structure but as a dynamic mechanism for cooperative governance, it firmly opposed any dilution of the Centre's powers. A strong Centre, it argued, was vital to preserve national unity amid fissiparous tendencies, yet this strength must avoid over-centralisation—which it likened to "blood pressure at the centre and anaemia at the periphery."
Spanning 247 recommendations, the report addressed a wide array of issues to foster healthier Centre-state dynamics. Key proposals included establishing a permanent Inter-State Council (now Inter-Governmental Council) under Article 263 to facilitate ongoing consultation. It urged extreme restraint in invoking Article 356 (President's Rule), reserving it as a last resort after exhausting all alternatives. Strengthening the All-India Services through new additions, retaining Parliament's control over residuary taxation powers while shifting others to the Concurrent List, and mandating communication of reasons when the President withholds assent to state bills were among its fiscal and legislative suggestions.
On gubernatorial roles, the commission recommended constitutional enshrinement of the practice of consulting chief ministers before appointing governors; a fixed five-year term for governors, terminable only for compelling reasons; and prohibitions on dismissing a council of ministers that retains assembly majority or instituting enquiries against state ministers without parliamentary demand. It also called for prior state consultation on Concurrent List legislation, Centre's deployment of armed forces (ideally with state consent), and sharing net proceeds of corporation tax with states—while limiting surcharges on income tax to specific, time-bound purposes.
Further reforms targeted intergovernmental bodies: renaming and reconstituting the National Development Council as the National Economic and Development Council; revitalising Zonal Councils to embody federal spirit; maintaining the division of roles between the Finance Commission and Planning Commission; and enforcing the three-language formula uniformly. It opposed autonomy for radio and television (favouring operational decentralisation instead), changes to Rajya Sabha's role or the Centre's state-reorganisation powers, and endorsed activating the Commissioner for Linguistic Minorities.
The Central government accepted and implemented 180 of these 247 recommendations, with the creation of the Inter-State Council in 1990 standing out as the most significant step toward collaborative federalism.
The Punchhi Commission on Centre-State Relations
In April 2007, the Government of India established the Second Commission on Centre-State Relations, chaired by former Chief Justice of India Madan Mohan Punchhi. This body succeeded the Sarkaria Commission of the 1980s, addressing the profound transformations in India's polity and economy over the intervening two decades. The Commission's mandate was to scrutinize the constitutional framework governing Union-State interactions, drawing on judicial precedents, established practices, and emerging challenges to propose reforms that balanced national unity with effective governance.
The terms of reference were comprehensive, tasking the Commission to review legislative, administrative, and financial relations; the Governor's role; emergency provisions; economic planning; Panchayati Raj institutions; and resource sharing, including inter-state rivers. Recommendations were to account for social and economic shifts, especially in recent years, while prioritizing good governance, national integrity, and opportunities for rapid growth to combat poverty and illiteracy. The Commission paid special attention to Centre-State dynamics in handling communal or caste violence, mega-projects like river inter-linking, devolution to Panchayati Raj and Sixth Schedule bodies, district-level planning, performance-linked central aid, positive discrimination for backward states, fiscal impacts of Finance Commission awards, post-VAT tax structures, freeing inter-state trade, a central law enforcement agency for inter-state crimes, and legislation under Article 355 for deploying central forces.
Submitted in April 2010, the Commission's 1,456-page report spanned seven volumes. It extensively referenced the Sarkaria Commission, the National Commission to Review the Working of the Constitution (NCRWC), and the Second Administrative Reforms Commission, though it diverged in several areas after thorough analysis.
At its heart, the report championed cooperative federalism as the cornerstone for India's future unity, integrity, and development—a practical guiding principle for polity and governance. Across more than 310 recommendations, it addressed critical facets of Centre-State relations with nuance and foresight.
Strengthening Legislative Harmony
To foster collaboration, the Commission urged broad Union-State consensus before legislating on Concurrent List subjects. It cautioned against excessive parliamentary dominance over State List matters, advocating restraint and flexibility for states, while limiting Union incursions to essential national-interest uniformity. An ongoing audit role for the Inter-State Council was proposed for overlapping jurisdictions. Further, it suggested aligning the six-month timeline under Article 201 for presidential action on reserved state bills, streamlining treaty-making under Entry 14 of the Union List via parliamentary law (mindful of federal limits), and mandating Finance Commissions to factor in treaty-related fiscal burdens on states.
Reforming the Governor's Office
Echoing yet refining Sarkaria guidelines, the Commission recommended selecting Governors—eminent outsiders untainted by local or recent politics—with a fixed five-year tenure, shielded from arbitrary central removal. Impeachment procedures akin to the President's were proposed. Discretionary powers under Article 163 should remain limited, rational, and cautious, not arbitrary. Governors must decide on state bills within six months and follow clear conventions for hung assemblies: prioritizing the largest supported party or pre-poll coalition, then post-poll alliances in a specified order. Dismissals require floor tests with deadlines; prosecution sanctions against ministerial bias should be possible; and non-constitutional roles like university chancellorships must end.
Safeguarding Against Emergencies
The Commission stressed exhausting alternatives under Article 355 before invoking Article 356, strictly for constitutional breakdowns—not paralysis from aggression or disturbance. It called for constitutional amendments embedding S.R. Bommai v. Union of India (1994) guidelines to prevent misuse and build state trust. Recognizing gaps, it advocated a "localised emergency" framework under Article 355 and relevant Schedule entries, allowing targeted central intervention without dissolving assemblies or upending state governments.
Bolstering Institutions and Coordination
Amendments to Article 263 would empower the Inter-State Council as a robust forum for disputes, with Zonal Councils meeting biannually under its secretariat. Sectoral Chief Minister forums (rotating chair) were suggested, modeled on the successful Empowered Committee of State Finance Ministers. New All-India Services in health, education, engineering, and judiciary were recommended, alongside revitalizing the Rajya Sabha through equal state representation (via amendment) to balance inter-state power and negotiate frictions.
Advancing Devolution, Fiscal Equity, and Trade
Devolution to local bodies must be constitutionally delineated for true self-governance, with central laws (like the RTE Act) mandating cost-sharing and retroactive amendments for others. Royalty on major minerals should revise triennially, with compensation for delays; profession tax ceilings should vanish via amendment; and Article 268 taxes reassessed by Finance Commissions or experts. Fiscal laws need independent annual audits laid before legislatures. Finance Commission terms should equitably weigh Centre and states, with state involvement in finalizing them; cesses and surcharges minimized; plan-non-plan distinctions reviewed; and synchronised cycles with Five-Year Plans. The Finance Commission division merits departmental status as a permanent secretariat, while the Planning Commission shifts to coordination, not micromanagement. Finally, an Inter-State Trade and Commerce Commission under Article 307—with binding powers and Supreme Court appeals—would unify markets, overriding state hesitations.
The report was shared with states, Union Territories, ministries, and departments for feedback, now under Inter-State Council deliberation, signaling ongoing commitment to federal refinement.