Centre - State Relations

The constitution of India contains detail provisions to regulate the various dimensions of the relations between the centre and the states. The centre-state relations can be broadly studied under three heads:
▸ Legislative relations
▸ Administrative relations
▸ Financial relations

Legislative Relations

▸ The legislative relations between the centre and states governments are discussed in Part XI from Articles 245 to 255 of the Constitution of India.

Territorial Extent of Central and State Legislation

▸ According to Article 245(1), Parliament may make laws for the whole or any part of the territory of India and the Legislature of a state may make laws for the whole or any part of the state.
▸ However, no law made by Parliament shall be deemed to be invalid on the ground that it would have extra territorial operation. Article 245(2) Laws of Parliament are not applicable in the matter of Union Territories (Andaman and Nicobar, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu). President can make regulation in these Union Territories' matters.

Distribution of Legislative Subjects

▸ The distribution of items of legislation are given under Article 246.
▸ Constitution provides for a three-fold distribution of legislative subjects between centre and state viz, List I Union List and List II State List and List III Concurrent List in the Seventh Schedule.
▸ Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule. Parliament and Legislature of any State, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule.
▸ The Legislature of any state has exclusive power to make laws for such state or any part there of with respect to any of the matters enumerated in List II in the Seventh Schedule. However, Parliament has power to make laws with respect to any matter for any part of the territory of India notwithstanding that such matter is a matter enumerated in the State List. The Union List has 100 items and the State List has 61 items whereas the Concurrent List has 52 items.
▸ The 42nd Amendment Act of 1976 transferred 5 subjects to Concurrent List from State List i.e. education, forests, weights and measures, protection of wild animals and birds, and organisation of all court except the Supreme Court and the High Courts.
▸ According to Article 248, Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List.

Power of Parliament to Legislate on State List Matters

When Rajya Sabha Passes a Resolution
▸ If the Council of States (Rajya Sabha) has declared by resolution supported by not less than two-thirds of the members present and voting that it is necessary or expedient in the national interest that Parliament should make laws with respect to any matter enumerated in the State List specified in the resolution, it shall be lawful for Parliament to make laws for the whole or any part of the territory of India.
▸ Such resolution passed shall remain in force for such period not exceeding 1 year provided that, if and so often as a resolution approving the continuance in force of any such resolution is passed, such resolution shall continue in force for a further period of 1 year from the date on which it would otherwise have ceased to be in force.
During National Emergency
▸ The Parliament acquires the power to legislative with respect to matters in the State List Article 250.
▸ The laws become inactive on the expiration of 6 months after the emergency has ceased to operate.
Power of Parliament to Legislate for Two or More States
▸ Under Article 252, if the Legislatures of two or more states desire that any of the matters with respect to which Parliament has no power to make laws for the states except as provided in Articles 249 and 250 should be regulated in such states by Parliament by law and if resolutions to that effect are passed by all the Houses of the legislatures of those states, it shall be lawful for Parliament to pass an act for regulating that matter accordingly and any act so passed shall apply to such states and to any other state, by which it is adopted afterwards by resolution passed in that behalf by the House or, where there are two Houses, by each of the Houses of the legislature of that state.
To Implement International Treaties
▸ The Parliament can make laws on any matter in the State List for implementing the international treaties, agreements or conventions. (Article 253)
During President's Rule
▸ When the President's rule is imposed in a state, the Parliament becomes empowered to make laws with respect to any matter in the State List in relation to that state. Such a law continues to be operative even after the President's rule. But such a law can be repealed as altered by the State Legislature.
Inconsistency between Laws
Under Article 254, if any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List then, the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void. However, if such law has been reserved for President's approval and has received such approval, the law stands valid even if it is repugnant to the Union Law.

Centre's Control over the State Legislation

▸ In addition to the Parliament's power to legislate directly on the state subjects, the Constitution also provides for the centre's consent before a Bill passed by a State Legislature can become a law. Although, the state enjoys authority to legislate on the subjects of the State List, the centre has power to direct the State Legislature to have conformity with the Union Laws.
▸ Any legislation passed by the State Legislature for acquisition of private property for public purposes will not become a law, unless it has the assent of the President.
▸ Under Article 200, the Governor is empowered to reserve a Bill for the President's consideration. Further, under the same article, the Governor has been directed to reserve any Bill affecting the dignity and functioning of the High Court for the President's consideration.
▸ Under Article 288(2), a state is authorised to impose taxes on water, electricity—stored, generated, consumed or distributed by the central authority e.g. National Thermal Power Corporation (NTPC), National Hydel Power Operation etc. But any such law is effective only after the President's assent.
▸ Under Article 304(b), the State Legislature is authorised to pass Bills regarding the imposition of reasonable restrictions on the freedom of trade, commerce and intercourse within the state in public interest. But any such Bill needs the President's prior approval for its introduction in the House.
▸ Taxes levied and collected by the centre, but assigned to the states. (Article 269)
— The following duties and taxes shall be levied and collected by the Government of India, but shall be assigned to the States in accordance with such principles of distribution as may be formulated by Parliament by law.
— Duties in respect of succession to property other than agricultural land.
— Estate duty in respect to property other than agricultural land.
— Terminal taxes on goods or passengers carried by railway, sea or air.
— Taxes on railway fares and freights.
— Taxes other than stamp duties on transactions in stock exchanges and future markets.
— Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-state trade or commerce.
▸ Taxes levied and collected by the union and distributed between the union and the states
— Article 270 says that taxes on incomes, other than agricultural incomes, shall be levied and collected by the Government of India and distributed between the union and the states in the manner prescribed by the President, after considering the recommendations of the Finance Commission.
▸ Surcharge on certain taxes and duties for purposes of the centre. (Article 271)
— Surcharge on certain duties and taxes for purposes of the Union Notwithstanding anything in Articles 269 and 270, Parliment may at any time increase any of the duties or taxes referred in those articles by a surcharge for purposes of the Union and the proceeds of any such surcharge shall form part the whole Consolidated Fund of India.
▸ Grants in lieu of export duty on jute and jute products
— Under Article 273, the States of Assam, Bihar, Odisha and Bengal will get grants in-aid every year in lieu of assignment of share of the net proceeds of export duty on jute and jute products. This amount will be charged upon the Consolidated Fund of India. This sum will continue to be charged on the Consolidated Fund of India so long as any export duty on the jute products continues to be levied by the Government of India.
▸ Grants from the Union to certain States
— Under Article 275 of the Constitution, such sums as the Parliament may by law provide shall be charged on the Consolidated Fund of India in each year as grants-in-aid to the revenues of such states as Parliament may determine to be in need of assistance and different sums may be fixed for different states.
— It has also been provided that these sums shall be paid out of Consolidated Fund of India as grants-in-aid to the states to meet the costs of such schemes of development as may be undertaken for the purpose of promoting the welfare of the Scheduled Tribes in the state or raising the level of administration of the scheduled areas therein to that of the administration of the rest of the areas of that state.
Mutual Immunity from Taxes
▸ Under Article 285 (1) the property of the union is exempted from all taxes imposed by a state.
▸ Similarly, the property and income of state are exempt from union taxation under Article 289 (1).
Borrowing Powers
▸ Article 292 says that Union Parliament can regulate the borrowing of the Union Government on the security of the Consolidated Fund of India.
▸ Article 293 says that states cannot borrow from outside the country. States can borrow from within the country, but if a loan given by the centre to the state is not paid back, then centre's permission is required for any further borrowing.
Goods and Service Tax (GST)
The GST is an indirect tax that would replace existing levies such as excise duty, service tax and Value Added Tax (VAT). The states and the Union Government will impose the tax on almost all goods and services produced in India or imported. Producers will receive credits for tax paid earlier, which will eliminate multiple taxation on the same product or service. Direct taxes, such as income tax, corporate tax and capital gains tax will not be affected. Eliminating a multiplicity of existing indirect taxes will simplify the tax structure, broaden the tax base and create a common market across states and federally administered districts. At the same time, GST will lower the average tax burden for goods and services companies that now pay 'casading' taxes on top of taxes through the production process. Reducing production costs will make exporters more competitive.

Alternative Scheme of Devolution (ASD)

▸ The Constitution of India provides for taxes which are shareable between the union and the states and those which are not shareable. Over the years, the Union Government concentrated on improving the elasticity of taxes like corporate income tax, union customs duty etc, which are not shareable and neglected similar effort for shareable taxes like personal income tax and excise.
▸ With the coming up of coalition governments, strong regional parties and need for economic reforms the proposal for ASD came up.
▸ The 80th Amendment Act, 2000 was passed for this purpose based on the recommendations of 10th Finance Commission. It amended Article 270 to make all taxes and duties referred in the Union List divisible.
▸ Between the union and the states except the duties and taxes, and duties under Article 271 and any cess levied for a specific purpose by a law made by Union Parliament.
The benefits of this system are as follows:
— States will share in the bouyancy of central taxes.
— Tax reforms pursued by union will get cooperation from states.
— Creates conditions for cooperative federalism in other sphere.

Finance Commission

▸ The Finance Commission is constituted by the President under Article 280 of the Constitution, mainly to give its recommendations on distribution of tax revenues between the centre and the states and amongst the states themselves.
▸ Two distinctive features of the commission's work involve redressing the vertical imbalances between the taxation powers and expenditure responsibilities of the centre and the States respectively and equalisation of all public services across the states.
▸ It is a quasi-judicial body.

Functions of Finance Commission

▸ It is the duty of the commission to make recommendations to the President as to
— the distribution between the centre and the states of the net proceeds of taxes which are to be or may be, divided between them and the allocation between the states of the respective shares of such proceeds.
— the principles which should govern the grants in aid of the revenues of the states out of the Consolidated Fund of India.
— the measures needed to augment the Consolidated Fund of a state to supplement the resources of the Panchayats in the state on the basis of the recommendations made by the Finance Commission of the state.
— the measures needed to augment the Consolidated Fund of a state to supplement the resources of the municipalities in the state on the basis of the recommendations made by the Finance Commission of the state.
— any other matter referred to the commission by the President in the interests of sound finance.

Important Recommendations of 14th Finance Commission

▸ Devolution of 42% of the divisible tax pool to states during the period from 2015-16 to 2019-20 instead of 32%.
▸ Setting up an independent council, which can undertake assessment of fiscal policy implications of budget proposals. Replacing the existing FRBM Act with a debt ceiling and fiscal responsibility law.
▸ Setting up of the autonomous and independent GST compensation fund. Performance based grants to panchayats and local bodies.
▸ Doing away with the distinction between plan and non-plan expenditure.
▸ In 2017, the Union Government with the approval of President of India has Constituted 15th Finance Commission to make recommendations for the five years commencing from 1st April, 2020 to 31st March, 2025.
Important Sources of Union Revenue
▸ Corporation tax.
▸ Currency, coinage and legal tender, foreign exchange.
▸ Duties of customs including export duties.
▸ Duties of excise on tobacco and certain goods manufactured or produced in India.
▸ Estate duty in respect of property other than agricultural land.
▸ Fees in respect of any of the matters in the Union List, but not including any fees taken in any court.
▸ Foreign loans–Lotteries organised by the Government of India or the Government of a State.
▸ Post Office Savings Bank.
▸ Post and Telegraphs, Telephones, Wireless Broadcasting and other like forms of communications.
▸ Property of the Union. Public debt of the Union. Railways.
▸ Rates of stamp duty in respect of Bills of Exchange, Cheques, Promissory Notes etc.
▸ Reserve Bank of India.
▸ Taxes on income-other than agricultural income.
▸ Taxes on the capital value of the assets exclusive of agricultural land of individuals and companies.
▸ Taxes other than stamp duties on transactions in stock exchanges and future markets.
▸ Taxes on the sale or purchase of newspapers and on advertisements published therein.
▸ Terminal taxes on goods or passengers, carried by railways, sea or rail.
Important Sources of the State Revenue
▸ Capitation tax
▸ Duties in respect of succession to agricultural land.
▸ Duties of exchange on certain goods produced or manufactured in the states, such as alcoholic liquids, opium etc.
▸ Estate duty in respect of agricultural land.
▸ Fees in respect of any of the matters in the State List, but not including fees taken in any court.
▸ Land revenue.
▸ Rates of stamp duty in respect of documents other than those specified in the Union List.
▸ Taxes on agricultural income.
▸ Taxes on land and buildings.
▸ Taxes on mineral rights, subject to limitations imposed by Parliament relating to mineral development.
▸ Taxes on the consumption or sale of electricity.
▸ Taxes on the entry of goods into a local area for consumption, use or sale therein.
▸ Taxes on the sale and purchase of goods other than newspapers.
▸ Taxes on advertisement other than those published in newspapers.
▸ Taxes on goods and passengers carried by road or on inlandwaterways. Taxes on vehicles.
▸ Taxes on animals and boats.
▸ Taxes on professions, traders, callings and employments.
▸ Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.
▸ Tools.

Administrative Relations

▸ Articles 256 to 263 in Part XI of the Constitution deal with the administrative relations between the centre and the States.
▸ The administrative relations corresponds to coordination aspects between the states and the center. The Constitution directs the states to oblige by the directions given by the Centre. This includes actions that should be taken for implementation of Union Laws and policies as determined by the Union Government. If the states refuse to comply with the directions given so, the President may declare a situation has arisen in the state of breakdown of constitutional machinery and may invoke President's rule in that state.
Power of the Union Government to Entrust Some Responsibilities to the State Governments
▸ According to Article 256, the Executive power of the Governments of States is to be so exercised as to ensure compliance with the Laws of the Union. Under Article 365, the Union Government is empowered to issue directions to the State Governments to ensure such compliance. Noncompliance of Central directives by the State Governments is tantamount to the failure of constitutional machinery in the concerned state and may invite imposition of President's Rule under Article 356.
Power of the Union to Issue Directions to the State Governments
▸ Under Article 258, the Union Government has the power to issue directions to the states with respect to construction and maintenance of means of Communication of National and Military importance and the Protection of Railways within the State. The cost incurred in performing these functions is borne by the Union Government.
▸ Union can give directions in matters related to the following as well
— Designing and implementing schemes for the welfare of the tribals.
— Primary education to the linguistic minorities in their mother tongue (Article 351A).
— Promotion of Hindi (Article 351).
Mutual Delegation of Functions
▸ To avoid any kind of rigidity in the executive sphere our Constitution has certain provisions, which allow for mutual delegation of executive functions by centre and states. President by the consent of the State Governments and Governor with the consent of Central Government can mutually delegate functions to each other. The Constitution also allows delegation of function from centre to the states even without the consent of the state concerned, but this type of delegation is done by the Parliament and not the President.
Provisions of All India Services
▸ Article 312, of the Constitution makes Provision for the establishment of All India Services like IAS, IPS and IFS (Indian Forest Service). The members of the All India Services are recruited by the UPSC and their service conditions are regulated by the Union Government. Members of these services occupy highest posts in of the State Government Administration. Their ultimate control rests with the Union Government.
▸ Article 312, also empowers Parliament to create new All India Services if Rajya Sabha passes a resolution to this effect. All India Services form single service with Common Rights and status and uniform scales of pay throughout the country. Though, these service violate the federal features of the country but they help in maintaining high standard of administration, ensure uniformity of the administrative system, facilitate liaison, cooperation and coordination between the centre and states.
Appointment of the Governors
▸ The Governor, besides being the Head of the Government of the State, is also the representative of the Union posted in the states. The President imposes Central Rule on the states on the recommendations of the Governor. A careful study of these provisions proves beyond doubt that the control of the Union Government over States is more extensive in administrative fields in comparison to the Legislative field.
Integrated Judiciary
▸ India has an Integrated Judicial System with Supreme Court at the top and State High Courts below it. The Single Integrated Judicial set-up enforces both the Central Laws as well as State Laws. Appointment, removal and transfer of State High Court Judges is done by the Central Government. Establishment of a common High Court, for two or more states, is also vested in the Central Governments.
Relations through Public Service Commission
▸ Centre and State Administrative relations are also strengthened through the Public Service Commissions. Though, the appointment of the Chairman and Members of State Public Service Commission are done by the State Governor but they can be removed by the President only. Parliament of our country has been authorised to create a JPSC (Joint Public Service Commission) for two or more States on request of concerned state Legislature. Also, Union Public Service Commission (UPSC) can serve the needs of the State on the request of Governor and approval by the President.
Centre-State Administrative Relations during Emergencies
▸ During National Emergency under Article 352, the centre becomes empowered to give directions to the state on any matter. During State Emergency under Article 356, the President assumes to himself the functions vested in the State Governments. Also, during Financial Emergency under Article of 360, the centre can direct the states to observe Cannons of financial propriety, even President can give directions regarding the reductions of salaries of persons serving in the state including High Court Judges. Apart from other provisions, there are extra constitutional devices like NITI Aayog, National Development Council, Zonal Councils, Central Welfare Council etc., to promote cooperation and coordination between the centre and states.

Financial Relations

The financial relations between the Union Government and the states are discussed in Part XII from Articles 268 to 293 of the Constitution of India. In a federation, the centre and the units are given their separate sources of revenues, so that they can stand on their feet. The Constitution provides the distribution of finances between the centre and states. These provisions have undergone several amendments with the latest being the Alternative Scheme of Devolution developed by the 88th Constitutional Amendment Act. The recent initative of goods and services tax is further expected to refine the financial relations between the centre and the states.
▸ Duties levied by the centre, but collected and appropriated by the states
— Article 268 of the Constitution lays down that the stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union List shall be levied by the Government of India, but shall be collected by the states.
The proceeds in any financial year of any such duty leviable within any state shall not form part of the Consolidated Fund of India, but shall be assigned to that state.

Inter-State Relations

The Indian federal system depends not only on the centre-state relation for successful functioning, but also depends on Inter-State Relations.

Inter-State Water Disputes

▸ Under Article 262, Parliament may by law provide for the adjudication of any dispute or complaint with respect to the use, distribution or control of the waters of, or in, any state rivers or inter-state river or river valley. Notwithstanding anything in this Constitution, Parliament may by law provide that neither the Supreme Court nor any other court shall exercise jurisdiction in respect of any such dispute or complaint as is referred to.
▸ Under this provision, the Parliament has enacted two laws i.e. The River Boards Act, 1956 and Inter-State Water Disputes Act, 1956.
Inter-State Water Dispute Tribunals

Name Set-up in State Involved Krishna Water Disputes Tribunal 1969 Maharashtra, Karnataka and Andhra Pradesh. Godavari Water Disputes Tribunal Maharashtra, Karnataka Andhra Pradesh, Madhya Pradesh and Odisha. Narmada Water Disputes Tribunal Rajasthan, Gujarat, Madhya Pradesh and Maharashtra. Ravi and Beas Water Disputes Tribunal 1986 Punjab and Haryana. Cauvery Water Disputes Tribunal 1990 Karnataka, Kerala, Tamil Nadu and Puducherry. Second Krishna Water Disputes Tribunal 2004 Vansadhara Water Disputes Tribunal 2010 Odisha and Andhra Pradesh. Mahaday Water Disputes Tribunal Goa, Karnataka and Maharashtra. Mahanadi Water Dispute 2018 Odisha, Chhattisgarh, Maharashtra, Jharkhand and Madhya Pradesh

Inter-State River Water Disputes (Amendment) Act, 2017

In order to further streamline the adjudication of Inter-state River Water Disputes, the Inter-state River Water Disputes (Amendment) Bill, 2017 came to existence. In the Bill, there is a provision for establishment of a Dispute Resolution Committee (DRC) by the Central Government for resolving amicably, the Inter-state Water Disputes within a maximum period of one year and six months. Any dispute which cannot be settled by negotiations shall be referred to tribunal for its adjudication.

Inter-State Council

▸ Inter-State Council serves a purposeful mechanism to bring various autonomous executive agencies of the state machinery, both the Union and the States, and coordinate amongst them the ways and means of execution and implementation of policies concerning common interests, both regional as well as national.
▸ Although a provision was made in the Constitution under Article 262 for the formation of such Inter-State Council, it was not until 1990, a formal Inter-State Council was established.
▸ This measure was taken after the Sarkaria Commission pitched for the formation of such a council.
▸ The council is a recommendatory body with the following duties :
— Investigating and discussing such subjects, in which some or all of the States or the Union and one or more of the states have a common interest, as may be brought up before it.
— Making recommendations upon any such subject and in particular recommendations for the better coordination of policy and action with respect to that subject;
— Deliberating upon such other matters of general interest to the States as may be referred by the Chairman to the Council.
▸ The Inter-State Council consists of the Prime Minister and several other Union Ministers, Chief Ministers of all the states and UTs Administrators of UTs and such other authorities as nominated by the Union Government.
▸ So far five meetings of the ISC have been held and a range of decisions have been taken by the council.
They include are as follows:
— Resolution passed to implement key recommendations of the Sarkaria Commission.
— Approval for the Alternative Scheme of Devolution of share in central taxes to states.
— Revamp of laws to finetune the Union-State relations in contemporaneous context.
— Time bound approval for State Bills reserved for President's consideration to avoid friction between the centre and the states.

Zonal Councils

▸ Zonal Councils were setup to supplement the coordination among regional states. The Union Home Minister is the ex-offico chairman of the such council alongwith the respective Chief Ministers of States. Five Zonal Councils have been setup till now.
▸ The present composition of each of these Zonal Councils is as under
— The Northern Zonal Council, comprising the States of Haryana, Himachal Pradesh, Jammu and Kashmir, Punjab, Rajasthan, National Capital Territory of Delhi and Union Territory of Chandigarh; HQ – New Delhi.
— The Central Zonal Council, comprising the States of Chhattisgarh, Uttarakhand, Uttar Pradesh and Madhya Pradesh; HQ – Allahabad.
— The Eastern Zonal Council, comprising the States of Bihar, Jharkhand, Odisha, Sikkim and West Bengal, HQ – Kolkata.
— The Western Zonal Council, comprising the States of Goa, Gujarat, Maharashtra and the Union Territories of Daman and Diu and Dadra and Nagar Haveli, HQ – Mumbai.
— The Southern Zonal Council, comprising the States of Andhra Pradesh, Telengana, Karnataka, Kerala, Tamil Nadu and the Union Territory of Puducherry, HQ – Chennai.
— North Eastern Council, comprising the states of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim, HQ-Shillong (Meghalaya).

Sarkaria Commission

▸ In the wake of the increasing strain in the centre-state relations, the Parliament, in June 1983, appointed a Commission under the Chairmanship of Justice RS Sarkaria to go into details of the centre-state relations and to recommend measures to make the relations more efficient and cooperative. The Commission submitted its report in January, 1988.
▸ The Commission did not call for any structural change, but preferred to continue the existing arrangement because the disintegrative forces are active in the country. However, the commission expressed the need for streamlining the provisions of the centre-state relations.
▸ It suggested the centre, to begin with, to relax its financial hold over the states and to give them more autonomy in this regard. This would make the regional powers more responsible.

Major Recommendations

On Article 356
▸ The Commission noted that this Article has been misused in 90% of the cases for political purposes. So, it recommends that
— the President's proclamation should include the 'reasons' as to why the State cannot be run as per the normal provisions of the Constitution.
— as far as possible, the centre should issue a warning to the State Government before resorting to the use of Article 356.
— it should not be used to serve political purposes.
— Article 356 should be amended so that the President be empowered to dissolve the State Legislature only after approval by the Parliament.
On Article 258
▸ The Commission recommended that the President should delegate some of the Union Executive functions in concurrence with the states. This will help in furthering the spirit of cooperative 'Federalism'.
On Concurrent List
▸ The centre should have a loose control over the subjects of the Concurrent List and consult the State Government before enacting any laws on such subjects.
On Article 252
▸ In case the Parliament makes a law under Article 252 (by mutual consent of two or more states), such law should be in force for not more than three years. Currently, such law can only be repealed by the Parliament whenever it wants, although the power to legislate has been given by the states.
▸ The award of the Inter-State River Water Tribunal should be made binding, automatically and not after the notification by the centre.
▸ Under Article 263, the centre should appoint 'Inter-State Council' and its name should be changed to 'Inter-Governmental Council', so as to exclude political issues.
▸ Sharing of the Corporate Tax between the state and the centre should be made mandatory.
▸ The surcharge must be levied for a limited period.
▸ The Judges of a High Court should not be transferred against their will of the above ten recommendations, 2a and 2b, (7) and (8) have been accepted. However, the name of the Inter-State Council has not been changed to 'Inter-Governmental Council', as recommended by the Commission.
On River Water Disputes
▸ The Commission recommended that
— once an application under the Inter-State River Disputes Act is received from a riparian State, the Union Government should setup-the Tribunal within a period of 1 year so as to avoid the delays that cause the water to lie wasted for the long periods of time.
— the Union Government should also be given the powers to act suo-moto without receiving complaint from any State.
— the award of the Tribunal should become effective within 5 years from the date of setting up of the Tribunal.
— the Award of the Tribunal should be made binding by giving it the force of a Supreme Court ruling.
— the Chairperson and members of the commission are appointed by the President on the basis of the recommendations of a committee comprising the Prime Minister as the Chairperson, the Speaker of the Lok Sabha, the Home Minister, the leader of the opposition in the Lok Sabha and the Rajya Sabha and the Deputy Chairperson of the Rajya Sabha as the members.

Punchhi Commission

▸ A new Commission to redefine Centre-State ties was setup on 27th April, 2007 to examine the possibility of giving sweeping powers to the Union Government, including suo moto deployment of central forces in states and investigation of crimes affecting national security. The commission, chaired by the former, Chief Justice of India, MM Punchhi, examined what could be the Centre's 'role, responsibility and jurisdiction' vis-a-vis states during major and prolonged outbreaks of communal violence, caste violence or any other social conflict.

Major Recommendations

On Appointment and Removal of Governors
▸ The panel also feels that Governors should have the right to sanction prosecution of a Minister against the advice of the Council of Ministers. However, it wants the convention of making them chancellors of universities done away with.
▸ As for qualifications for a Governor, the Punchhi Commission suggests that the nominee should not have participated in active politics at even local level for at least a couple of years before his appointment. It also agrees with the Sarkaria recommendation that a Governor be an eminent person and not belongs to the state where he is to be posted.
▸ The Commission also criticises arbitrary dismissal of Governors, saying, 'the practice of treating Governors as political football must stop'. There should be critical changes in the role of the Governor-including fixed 5 years tenure as well as their removal only through impeachment by the State Assembly. It has also recommended that the State Chief Minister have a say in the appointment of Governor.
▸ Underlining that removal of a Governor be for a reason related to his discharge of functions, it has proposed provisions for impeachment by the State Legislature along the same lines as that of President by the Parliament.
▸ This, significantly, goes against the doctrine of pleasure upheld by the recent Supreme Court judgement.
▸ Endorsing an NCRWC recommendation, it says appointment of Governor should be entrusted to a committee comprising the Prime Minister, Home Minister, Speaker of the Lok Sabha and Chief Minister of the concerned state. The Vice- President can also be involved in the process.
▸ Unlike the Sarkaria Report, the Punchhi Report is categorical that a Governor be given fixed 5-years tenure. The Punchhi Commission report also recommends that a constitutional amendment be brought about to limit the scope of discretionary powers of the Governor under Article 163 (2). Governors should not sit on decisions and must decide matters within a 4-months period.
On Appointment of Chief Ministers
▸ Among the significant suggestions made by the Commission is, laying down of clear guidelines for the appointment of Chief Ministers.
▸ Upholding the view that a pre-poll alliance should be treated, as one political party, it lays down the order of precedence that ought to be followed by the Governor in case of a hung House, — Call the group with the largest prepoll alliance commanding the largest number;
— Single largest party with support of others;
— Post-electoral coalition with all parties joining the government and last the post-electoral alliance with some parties joining the government and remaining including independents supporting from outside.
On National Integration Council
▸ The creation of an overriding structure to maintain internal security along the lines of the US Homeland Security Department, giving more teeth to the National Integration Council. For the National Integration Council (NIC), the Commission has proposed that it should meet at least once a year.
▸ The, Commission, however, rejects a suggestion from some stakeholders as well as the Liberhan Commission that the NIC be accorded constitutional status.
On Internal Security
▸ The Commission has also studied new setups like the National Investigation Agency and recommended procedures to ensure smooth cooperation of the states in terror investigations entrusted to NIA.
▸ The recent ruling of the Supreme Court has indicated that the sanctity of this constitutional post should be preserved. In democracy, no body can have absolute power in the name of smooth administration and good governance.
▸ The administrative apparatus has to be in the line of the Constitution, which was prepared by the people of the country and amended by the elected representative of the people of India. The doctrine of pleasure has to be understood in this light.
On Articles 355 and 356
▸ There should be an amendment in Articles 355 and 356 to enable the centre to bring specific trouble-torn areas under its rule for a limited period.
▸ The Commission has proposed 'localising emergency provisions' under Articles 355 and 356, contending that localised areas either a district or parts of a district be brought under Governor's rule instead of the whole state.
▸ Such an emergency provision should however not be of duration of more than three months.
▸ The Commission however supports their right to give sanction for the prosecution of ministers against the advice of the State Government.
▸ Deployment of central forces.
▸ To make an amendment in the Communal Violence Bill to allow deployment of central forces without the state's consent for a short period.