Press Release

On Restructuring of Centre-State Relations

 The CPI (M) has prepared an Approach Paper on Restructuring of Centre-State Relations. This is being put forward to initiate a discussion among political parties and organisations to enable the emergence of a common platform and bring about a restructuring of Centre-State relations.

 The CPI (M) has always held that the Indian Constitution, while being federal in form, is more unitary in character. The basic structure remains to be one where legislative, administrative and financial powers are disproportionately concentrated in the Union Government with the States having a large number of responsibilities without sufficient autonomy. Strengthening the federal system is necessary for meeting the aspirations of the people who are governed through State Governments and for preserving the unity of India.

 The CPI (M) has put forward a set of demands for restructuring of Centre-State relations on legal, administrative, financial, institutional and other matters. Some of the major demands are listed below:

Legal and Administrative Issues

 Articles 356 and 355: Articles 356 and 355 of the Constitution should be amended, in order to incorporate safeguards to prevent their misuse.

Appointment of Governors: The current process of appointment of Governors by the Central Government should be changed. The Governor should be appointed by the President from a list of three eminent persons suggested by the Chief Minister of a State.

 Legislative Powers for States: Residuary powers of legislation should be placed in the State List. A process of consultation between the Centre and the States needs to be institutionalised on legislations under the Concurrent list.

 Financial Issues

 Devolution of Central Taxes to States: 50% of the total pool of collection of Central taxes should be devolved to the States.

 Residual Powers of Taxation: The States should be allowed to tax certain services including some services which are currently being taxed by the Centre. A suitable model for the proposed Goods and Services Tax should be evolved to ensure a fair share for the States.

 Market Borrowing by States: Article 293 of the Constitution should be amended to provide more flexibility and autonomy to the States in regard to market borrowing. The share of market borrowing of the States should be increased from about 15% per cent currently to 50%.

 Debt Relief and Conditionalities: Debt relief for the States on account of the Central loans should not be tied to any conditionality. Conditionalities imposed upon the States like the passage of FRBM Act should be withdrawn. Debt relief should be worked out in a State-specific manner, especially with regard to loans from the NSSF.

Centrally Sponsored Schemes: The formulation and implementation of all Centrally Sponsored Schemes under the State subject should be transferred with funds to the States along with broad guidelines and minimum conditions. Conditionalities like reduction of stamp duties as required under the Schemes like JNNURM should be withdrawn.

 Devolution to Local Self-Governments: A target minimum level of Local Self-Government expenditure to GDP should be set. Funds devolved to the local bodies should mandatorily be routed through the State Governments.

Institutional Issues

 Inter-State Council: The Constitution should be amended to make the decisions of the Inter-State Council binding on the Union Government. All major issues involving Centre-State relations have to be discussed and decided by the Inter-State Council.

NDC and Planning Commission: The National Development Council should be granted Constitutional status. The Planning Commission should act as an executive wing of the NDC.

Finance Commission: In determining the terms of reference of the Finance Commission, the views of the States should be taken into account. Any difference of views on the terms of reference should be settled in the Inter-State Council. There should be adequate representation of the States in the Finance Commission.

 Special Category States: The differential benefits given to these States in terms of the non-Plan Gap Grant and Normal Central Assistance should continue. The debt of these State Governments should be settled in a one time manner without any conditionality. The release of funds to the Special Category States under the Centrally Sponsored Schemes should be done in a timely manner without stringent conditions on fund utilization.

Click here for the full text of the document


click here for the CPI(M)’s response to questions from the commission on centre-state relations