CENTRE-STATE RELATIONSHIPS

GROUP 12 AASHRIK JHAWAR ANKIT MACHHAR MISHAL GOLECHHA DHAVAL GAJJAR

Indias Federal Structure till 1990s

UNION

STATES

DISTRICT

BLOCK / TALUKA

VILLAGE

Federal Structure in India After 1992

Central Government State Government Local Government
Urban Local Bodies
Corporations Municipalities Town Areas

Rural local SelfGoverning Institutions

District Panchayats (540)
Intermediate

Panchayats (6096)
Village Panchayats (2,32,000)

The Administrative Structure of the Government of India

President Vice President Prime Minister Council of Ministers Minister Minister Minister

Secretary
Additional Secretary Joint Secretary

The Administrative Structure of the State Governments

Governor

Chief Minister Council of Ministers

Minister Secretary Additional Secretary

Minister

Minister

Joint Secretary

COMMISSION ON CENTRE-STATE RELATIONSHIPS

The Commission examined the same in the three universally accepted sectional forms namely, the legislative, the administrative and the financial relations. In the legislative relations, among others, detailed consideration was given to the structural and functional aspects of the legislative lists in the domain of the Centre, the State and the concurrent jurisdiction, the Articles of the Constitution bearing close links with the functioning of the Centre and States and the related aspects. In the administrative relations the report provided extensive focus on the role of Governor, the prime and organic Constitutional link between the Centre and the State.

In financial relations, detailed consideration was given to the distribution of taxation powers, the transfer mechanisms under the aegis of the Finance Commission(s), the resource mobilization practices by the Centre and the States, the economic and social planning including the Panchayati Raj system, the balanced development of agriculture and industry, the inter-state trade and commerce, the inter-state riverwater disputes and other connected issues, which had the economic, political and emotive bearing on the federal relations. In addition, the Commission focused its attention to the role of Judiciary, the mass media, dissemination and communication of prompt and correct information and the management of the language formulae to promote healthy practices and sound federal relations.

STATE FINANCES AN OVERVIEW

Presently, most states are fiscally stressed and have unacceptably high debt levels coupled with high revenue deficits: Aggregate revenue deficits of states are in excess of 25% of their revenue receipts. Debt- GDP ratio is about 30%. As part of a MTFRP, GOI now determines the borrowing limits for states. These limits are defined both in terms of aggregates as well as in terms of specific components. The above ceilings and their componental distribution are not rigid.

TAXING POWERS OF UNION AND STATES

-Clear division of Taxing Powers -No overlapping of Tax jurisdictions -Little scope for Competitive exploitation of the same resource (A)Taxes controlled by Union (B)Taxes controlled by States (C)Residuary taxing powers of Union

APPROPRIATION OF PROCEEDS

[OF UNION TAXES BY STATES]

Balancing the Central-State Fiscal position through appropriation as Duties levied by the union but collected and appropriated by the states. Taxes levied and collected by the Union but wholly assigned to the states. Taxes levied and collected by the Union but distributed between the Union and the States. Taxes though levied, collected and wholly appropriated by the Union but the States claiming share in them. Taxes levied and collected by the Union but may be distributed between Union and States.

Borrowing powers of the Union and the States

(A) Borrowing powers of the Union-

Article 292 of the Constitution Confers upon the Govt. of India exclusive power to borrow upon the scrutiny of the Consolidated Fund of India (i.e. of the resources of the Union), subject to such limitations as Parliament may be law impose under its legislative Power with respect to the Public Debt of the Union.

(B) Borrowing powers of the StateConstitutional provisions- Articles 293(1)- 293(4) lay down the position in this regard. Under these, states can: Borrow only within the territorial limits of India

With the prior consent of GOI in case they have loans outstanding against GOI
GOI may impose conditionalities prior to granting consent

STATES OWN RESOURCES

Balance from current revenues

Contribution
undertakings

from

State

Public

Sector

Plan Grants awarded by Finance Commissions Net Miscellaneous Capital Receipts Provident Fund

Mobilization of Small Savings

Statutory Liquidity Ratio Based borrowings Negotiated Loans Debentures and Bonds

CENTRAL ASSISTANCE
Union Government is giving the Central assistance to State Plans. Given in the form of block grants & loans in the ratio of 90:10 for special category States and 30:70 for

others
Normal Central assistance Based on the Gadgil-Mukherjee formula approved by the National Development Council in 1991 Following criteria:-

Population (1971 census & 1977 projection) 2. Income criteria

60% 25%

Of which deviation criteria Distance Method 3. Performance Tax Effort Fiscal management National Objectives Pop control Female literacy

20%
5% 7.5% 2.5% 2.0% 3.0% 1.0% 1.0%

On time completion of 0.5% Externally aided projects Land Reforms 0.5% 4. Special Problems Total 7.5% 100.00

Additional Central Assistance for Externally Aided projects: Central Government provides assistance to States on the basis of actual expenditure incurred on the projects

SCALE OF OPERATIONS (MINISTRY OF FINANCE)

Total Loan Portfolio outstanding for all State Governments as

on 1st April, 2006 is Rs.1,52,000 crores(US $ 33 b).

Total volume of transactions (turn over) on an yearly basis is : Releases (Loans,Grants,Investments)Rs.2,43,000 crores(US $ 53 b). Repayments Rs.21,000 crores(US $ 9 b). Prepayments under Debt Swap Rs.1,05,000 crores(US $ 23.0 b) Total number of records generated annually 18,000

TRANSFER TO STATES & UTs

Rs. in crores Major Head 2245-Relief on natural calamities 3601-Grants to State Govts 3602-Grants to Uts 7601-Loans & Advances to State Govts. DEVOLUTION OF TAXES Transfer of Small Saving Collection ( Investments) TOTAL 2005-06 (Actual) 2,175.00 50,115.00 325.00 5,325.00 94402.00 89836.00 242178.00

THANK YOU