Centre-State Relations & Inter-State Disputes — Federalism in Practice

Introduction

India's Constitution establishes a federal system with a strong unitary bias — a phrase coined by K.C. Wheare who called it "quasi-federal." The Constitution distributes powers between the Union and States through three lists in the Seventh Schedule. Understanding Centre-State relations is foundational for GS Paper II as it underpins questions on federalism, cooperative federalism, fiscal federalism, Governor's role, and inter-state disputes.

Division of Powers: The Three Lists (Seventh Schedule, Article 246)

*Current counts differ from originals due to 42nd Amendment (1976), which transferred 5 subjects from State List to Concurrent List: education, forests, weights & measures, protection of wild animals, administration of justice in districts (excluding Supreme Court & High Courts).

Key rule: In case of conflict between a Central law and a State law on a Concurrent List subject, the Central law prevails (Article 254), unless the State law received Presidential assent and was enacted later — even then Parliament can re-override.

Important Union List subjects: Defence, atomic energy, foreign affairs, citizenship, railways, highways, banking, RBI, stock exchanges, income tax, customs.

Important State List subjects: Public order, police, prisons, local government, public health, agriculture, land, liquor.

Important Concurrent List subjects: Criminal law (IPC/CrPC), civil procedure, marriage and divorce, education, forests, trade unions, social security, electricity.

Legislative Relations: Articles 245–255

Territorial Extent of Legislation

• Article 245: Parliament can legislate for the whole or any part of India; a State legislature can legislate for the whole or part of that State.
• Article 246: Distributes subjects among three lists (see above).
• Extraterritorial legislation: Parliament can make laws for Indian citizens/interests outside India (Article 245(1)); State laws cannot have extraterritorial operation.

Parliament's Power to Legislate on State Subjects (Exceptions)

Administrative Relations: Articles 256–263

Centre's Direction Power

• Article 256: Every State must exercise its executive power to ensure compliance with laws of Parliament. Centre can issue directions to States.
• Article 257: States must exercise their executive power so as not to impede or prejudice Centre's executive power. Centre can direct States on: (i) construction and maintenance of means of communication of national or military importance; (ii) measures for protection of railways within the State.
• Article 257-A (deleted): Was inserted by 42nd Amendment (1976) giving Centre power to deploy forces in States; deleted by 44th Amendment (1978).

Centre's Power to Ensure Compliance

• Article 365: If a State fails to comply with Centre's directions, it is lawful for the President to hold that a situation has arisen where the government of the State cannot be carried on in accordance with the Constitution — this is a ground for President's Rule.

All India Services (Article 312)

• Rajya Sabha can create new All India Services (AIS) by a 2/3 majority resolution if it is in the national interest.
• Existing AIS: IAS, IPS, IFoS (Indian Forest Service added 1966).
• AIS officers serve both Centre and States; their service conditions are determined by Parliament — this gives Centre leverage over State administration.
• Significance: The AIS is a key instrument of unity and integration; the Constitution's framers retained it from the colonial ICS as a steel frame linking Centre and States.

Delegation and Inter-State Cooperation

• Article 258: Centre may, with consent of State government, entrust to a State (or its officers) functions relating to any Central matter.
• Article 258-A: A State government may, with consent of the Centre, entrust Central functions to the Centre.
• Article 261: Full faith and credit shall be given throughout India to public acts, records, and judicial proceedings of the Union and every State.

Financial Relations: Articles 268–293

Division of Taxing Powers

Finance Commission (Article 280)

• The President constitutes a Finance Commission every 5 years (or earlier as deemed necessary).
• Mandate: Recommend distribution of net proceeds of taxes between Union and States; principles for grants-in-aid to States; any other matter referred by President.
• 16th Finance Commission constituted in 2023 under Dr. Arvind Panagariya; award period 2026-31.
• 15th Finance Commission (2021–26): recommended 41% of divisible pool to States (down from 42% due to J&K bifurcation).
• Vertical devolution: Share of taxes going to States.
• Horizontal devolution: How the States' share is distributed among States.

GST Council (Article 279A)

• Inserted by 101st Constitutional Amendment Act, 2016.
• Chaired by Union Finance Minister; members are State Finance Ministers.
• Decisions by 3/4 majority of weighted votes — Centre's vote = 1/3 weight; States' votes collectively = 2/3 weight.
• Recommends: GST rates, exemptions, threshold limits, model GST laws.
• Supreme Court ruling (2022): GST Council's recommendations are not binding on Parliament and State legislatures — they are only persuasive.

Grants-in-Aid (Articles 275, 282)

• Article 275: Grants from Consolidated Fund of India to States in need of assistance; specific grants for tribal welfare and raising administrative standards.
• Article 282: Both Centre and States can make grants for any public purpose even outside their legislative competence.

Article 356 — President's Rule

Constitutional Provisions

• Article 356(1): If the President is satisfied, on receipt of a report from the Governor or otherwise, that the government of a State cannot be carried on in accordance with the provisions of the Constitution, the President may proclaim President's Rule.
• Effect: (a) State executive vests in President; (b) Parliament assumes legislative functions of State legislature; (c) State legislature may be dissolved or suspended.

Duration and Parliamentary Approval

• Proclamation must be approved by both Houses of Parliament within 2 months (by simple majority).
• Can continue for 6 months from date of proclamation.
• Extension beyond 6 months (up to 3 years) requires fresh Parliamentary approval every 6 months.
• Extension beyond 1 year requires: (i) a Proclamation of National Emergency to be in force in the State or in the whole of India; and (ii) Election Commission must certify that elections cannot be held in the State.

Safeguards Added by 44th Amendment (1978)

• Rajya Sabha cannot be bypassed: If Lok Sabha is dissolved before approving the proclamation, the Rajya Sabha can approve it; the Lok Sabha must ratify after reconstitution.
• 6-month limit: Each extension requires fresh Parliamentary approval (originally no time limit existed).

Judicial Review: S.R. Bommai Case (1994)

This is the most important judgment on Article 356 — frequently tested in UPSC Mains.

Facts: S.R. Bommai was the Chief Minister of Karnataka (Janata Dal). In 1988, a legislator defected and withdrew support from the Bommai government. The Governor reported to the President that the government had lost its majority. The President imposed President's Rule without allowing a floor test. Bommai challenged this in the Supreme Court.

Judgment: A 9-judge constitutional bench of the Supreme Court decided the case on March 11, 1994 (AIR 1994 SC 1918). Key holdings:

Impact: The S.R. Bommai judgment drastically curtailed the misuse of Article 356. Before 1994, President's Rule had been imposed over 100 times — often for political reasons. After Bommai, courts have increasingly subjected such proclamations to judicial scrutiny.

Usage data: Article 356 was invoked 132 times from 1950 to 2018. The first use was in Punjab in 1951.

Governor: The Linchpin of Centre-State Relations

Sarkaria Commission found that Governors had been misused to destabilise State governments. Punchhi Commission recommended that the Governor's term be fixed at 5 years and removal only by Parliament.

Inter-State Water Disputes: Article 262 and the ISRWD Act

Constitutional Framework

• Article 262(1): Parliament may by law provide for adjudication of any dispute or complaint with respect to use, distribution, or control of waters of any inter-State river or river valley.
• Article 262(2): Parliament may bar the jurisdiction of the Supreme Court and all other courts in such disputes — this is an extraordinary exclusion clause.
• Inter-State River Water Disputes Act, 1956 (ISRWD Act): Enacted under Article 262. Provides for constitution of ad hoc Water Disputes Tribunals.

Tribunal Process

1. A State makes a request to Central Government that a water dispute has arisen.
2. If Central Government is satisfied that the dispute cannot be settled by negotiation, it constitutes a Tribunal within one year (amended 2002 on Sarkaria Commission recommendation).
3. Tribunal must give its award within three years (extendable by 2 more years).
4. Tribunal award is final and binding on parties; notified by Central Government in the Official Gazette.
5. Supreme Court bar: Once a Tribunal is constituted, the Supreme Court loses jurisdiction under Article 262(2).

Major Active Tribunals and Disputes

Cauvery Water Dispute — Case Study

Historical background:

• 1892 & 1924 Agreements between Madras Presidency and Mysore State regulated water sharing.
• Post-Independence, when States reorganised on linguistic basis (1956), disputes intensified.
• Karnataka (rice cultivation expansion) vs Tamil Nadu (traditional rights).

CWDT established: 1990; took 17 years to deliver final order in 2007.

Final award (2007):

• Tamil Nadu: 419 tmcft (thousand million cubic feet)
• Karnataka: 270 tmcft
• Kerala: 30 tmcft
• Puducherry: 7 tmcft

Supreme Court judgment (February 16, 2018):

• Modified award: Tamil Nadu — 404.25 tmcft; Karnataka — 284.75 tmcft.
• Declared Cauvery a national asset.
• Directed Centre to formulate a scheme for implementation.

Cauvery Water Management Authority (CWMA):

• Central Government notified the Cauvery Water Management Scheme in June 2018.
• CWMA constituted to secure compliance with Supreme Court's order.
• Cauvery Water Regulation Committee (CWRC) established under CWMA to monitor and regulate releases.

Article 263 — Inter-State Council and Zonal Councils

Inter-State Council

• Article 263: President may establish an Inter-State Council if it appears to him that the public interests would be served thereby.
• Functions: Inquire into and advise upon disputes between States; investigate and discuss subjects where some or all States or the Union have a common interest; recommend policy and action.
• Inter-State Council established by Presidential Order in 1990 (on Sarkaria Commission recommendation).
• Composition: PM as Chair; Chief Ministers of all States and UTs with legislatures; 6 Cabinet Ministers nominated by PM.
• Meets infrequently — no specific mandatory schedule.

Zonal Councils

• Statutory bodies created by States Reorganisation Act, 1956 (not constitutional).
• Five Zonal Councils: Northern, Central, Eastern, Western, Southern.
• North-Eastern Council: Established by North-Eastern Council Act, 1971.
• Chaired by: Union Home Minister (since 2002).
• Purpose: Promote cooperation on matters of common interest — economic and social planning, border disputes, inter-State transport, etc.
• Purely advisory — cannot override Centre or State legislative or executive decisions.

Sarkaria Commission (1983)

Constituted: June 1983 by Prime Minister Indira Gandhi. Chairman: Justice R.S. Sarkaria (retd. Judge, Supreme Court). Report submitted: January 1988 — a massive 1,600-page document with 247 recommendations.

Context: Growing regionalism in 1980s (Punjab, Assam, Tamil Nadu), demands for more autonomy by regional parties in power in States.

Key Recommendations

Acceptance: Many recommendations were not implemented immediately. The Inter-State Council was set up in 1990.

Punchhi Commission (2007–2010)

Constituted: April 2007. Chairman: Justice Madan Mohan Punchhi (retd. Chief Justice of India). Report submitted: March 30, 2010 — a 7-volume report with 273 recommendations.

Context: Changed political landscape since Sarkaria — rise of coalition governments at Centre, globalisation, economic liberalisation, new security challenges.

Key Recommendations

Cooperative Federalism and Competitive Federalism

Cooperative Federalism

A model where Centre and States work as partners, pooling resources and sharing responsibilities, rather than adversarial federalism.

Institutional manifestations in India:

• NITI Aayog (2015): Replaced the top-down Planning Commission; includes Governing Council with all CMs and Lt. Governors; emphasis on States as "development partners."
• GST Council (Article 279A): Joint decision-making body on indirect tax policy — the most significant example of cooperative federalism in practice.
• Aspirational Districts Programme (now Aspirational Districts/Blocks): Centre–State collaboration for development of backward districts.
• SDG Localisation: NITI Aayog's State/UT ranking on SDG index — promotes cooperation on development goals.

Competitive Federalism

States compete with each other to attract investment, improve governance rankings, and demonstrate better performance.

Examples:

• Ease of Doing Business rankings (DPIIT): States ranked annually; creates positive competition.
• Sustainable Development Goals (SDG) index (NITI Aayog): States ranked on SDG performance.
• Export Preparedness Index (EPI): State performance on exports.
• Swachh Survekshan: Cities ranked on cleanliness — competitive pressure for improvement.

Critique: Competitive federalism can widen regional inequalities if less-developed States cannot compete on equal terms.

Key Constitutional Provisions Summary Table

Previous Year Questions (PYQs)

Prelims

1. (UPSC CSE Prelims 2017) The Punchhi Commission, 2007 was set up to examine which of the following? — Relations between the Central Government and the States.

2. (UPSC CSE Prelims 2015) The judgment in S.R. Bommai case (1994) deals with which one of the following? — Powers of the President to impose President's Rule in a State.

3. (UPSC CSE Prelims 2012) Under the Inter-State Water Disputes Act, 1956, which of the following jurisdictions is excluded when a Water Disputes Tribunal is constituted? — Supreme Court.

4. (UPSC CSE Prelims 2021) With reference to India's federalism, which one of the following best describes the relationship between the Union and the States on the Concurrent List? — Parliament's laws on Concurrent List subjects prevail over State laws in case of repugnancy, except where the State law has received Presidential assent and was passed after the Parliamentary law.

Mains

1. (UPSC CSE Mains GS2 2016) "The Governor is an agent of the Centre." In the light of this statement, examine the role of the Governor in the constitutional scheme of India.

2. (UPSC CSE Mains GS2 2017) Whether the Supreme Court's judgment in S.R. Bommai case (1994) accurately implements the intentions of the Constitution-makers regarding the use of Article 356. Discuss.

3. (UPSC CSE Mains GS2 2022) 'The Punchhi Commission on Centre-State Relations provides a robust framework for strengthening cooperative federalism.' Critically examine.

4. (UPSC CSE Mains GS2 2019) Inter-state water disputes have plagued India's cooperative federalism. Analyse the effectiveness of the Inter-State River Water Disputes Act, 1956 in resolving these disputes.

Exam Strategy

For Prelims:

• Memorise the exact number of subjects in each List (Union: 98 entries; State: 61; Concurrent: 52 — current post-42nd Amendment counts).
• Know that Article 262 bars Supreme Court jurisdiction on inter-state water disputes.
• Know the S.R. Bommai case year (1994) and its key holdings (floor test, judicial review of Article 356).
• Know composition of GST Council and the weighted voting: Centre = 1/3, States collectively = 2/3.
• Finance Commission is established under Article 280 every 5 years.

For Mains:

• For any question on federalism or Centre-State relations, use the three dimensions structure: Legislative relations → Administrative relations → Financial relations.
• The S.R. Bommai case is essential for any question on Article 356 or President's Rule — include the 9-judge bench, 1994, key principles.
• For inter-state water disputes, use the Cauvery case as a detailed example.
• Sarkaria vs Punchhi: Sarkaria (1983–88, 247 recs) was the first commission; Punchhi (2007–10, 273 recs) updated it — highlight the contextual differences.
• Cooperative vs Competitive federalism: NITI Aayog and GST Council = cooperative; DPIIT rankings and SDG index = competitive.
• Link to current affairs: Any news about Centre dismissing a State government, water disputes, Governor withholding Bills, or GST Council disputes is relevant here.
• The Governor's role is a perennially important sub-topic — frame it around the constitutional provisions, judicial interpretations, and Commission recommendations.