Could Federalism Be The Real Solution Of NE India's Problem Of Insurgency
(Special Reference to the study of Naga's peace Talk)
- Part 2 -

Dr. Dhanabir Laishram *

A Map of North East India

Misusing of Articles 355 and 356:

The misuse of Article 356 is the vivid example of colourable legislation in the centre-state relationship. With the help of this Article, the central government dismisses state governments and dissolves state Assembly. It has been subverting the federal principles and the rights of the states. The demand to restrict the use of Article 356 only to cases where there is a serious threat to national unity or the secular fabric of the country has been raised from various quarters in successive meetings of the Inter-State Council. In view of the supreme court judgement in the S. R. Bommai case, there is an urgent need to build in strong safeguards in Article 356 and 365 through appropriate amendments to the constitution. However, no decision has been taken by the union government in this regard. There is also a new and alarming proposal for central deployment of paramilitary forces in the states unilaterally in a situation which the centre would consider as an 'internal disturbance'.

The provisions of Article 355 need to be clarified. As has been repeatedly stressed by several constituents of the Inter-State Council, the term 'internal disturbance' in Article 355 is related to 'public order', which is the first entry in state list. The proposal for central deployment of paramilitary forces in a state in a situation which the centre would consider as 'internal disturbance' without the states concurrence is unacceptable. Article 355 should be amended on the lines suggested above for Article 356. Apart from external aggression, only a serious threat to national unity or an assault on the secular principle can be taken cognizance of such misusing of Article 355 and 356.

In case of Manipur, the state was under the president rule more than ten times before Anti Defection Act was implemented. Most of them were against the formation of government by regional parties or national parties, which were not ruled in the centre. Moreover deployment of paramilitary forces in a state by the centre in a situation in which the centre would consider as 'internal disturbance' without the state's concurrence created all forms of human rights violation like killing, torture, raping, disappearances, fake encounter, massacre, detention in custody more than 24 hours, etc.

Here one may analyse the demand of NSCN (IM) in this on going peace talk regarding such misusing of Acts. They demanded that the Government of Nagaland has to have its own Armed Forces and would be exclusively responsible for the internal security of Nagaland though both the armed forces will be responsible for the external threat. In response, Government of India's (GoI) position as conveyed during negotiation is that the Armed Forces of the Union can set up cantonments and camps anywhere in Nagaland but there would be no deployment for internal security.

Appointment and Role of Governors:

The provision for centrally appointed governors for the states has remained as an anachronism, which is not in keeping with a federal democratic polity. By the post of governor has to be retained, and then the governor should be appointed by the president from a list of three eminent persons suggested by the chief minister, satisfying the criteria mentioned by the Sarkaria Commission. This has also been repeatedly discussed in the Inter-State Council. None of the major countries of the world with a federal constitution have any provision for the post of the governor in a state to be appointed by the centre. There should also be a time limit with regard to governor's assent to bills passed by the state assemblies. Moreover, the requirement of an explicit norm debarring governors from publicly expressing disagreements or differences with the state government also needs to be debated. There is also need to review whether governor should continue to be ex-officio chancellor of state universities. In Manipur maximum numbers of governors are army officers. Inspite of having competent persons in the state, not a single person of Manipuri had been appointed as governor to other states since 1951.

In such cases of governor's role in the state and its appointment, there is no demand to revision it except to change the name as Yarulwo in the demand of the NSCN (IM). Central Intrusion into the State List: The state subjects have already been transferred such as education to the concurrent list. It had been left unreserved. But further intrusions have also been made into the state list in terms of proliferation of the so-called centrally sponsored schemes. These central schemes on the state subjects, which contain rigid guidelines imposed by the centre, besides having implications in the financial sphere, also weaken the autonomy of the states and affect their development priorities. There is an urgent need to review the impact of the transfer of legislative items from the state to the union or concurrent list.

The union government has so far ignored the demand of the states to place at least the residuary powers of legislation in the state list. The residuary power of taxation in the sphere of services is being pre-emptorily used by the union government to the total exclusion of the states. Despite discussions in the Inter-State Council, the proposal for a constitutional amendment to set define times limits for receiving the assent of governors or president in the case of bills passed by the state assemblies has so far been ignored. Moreover, there is no formal institutional structure that requires mandatory consultation between the centre and the states in areas of legislation under the concurrent list. As far as education is concerned, NSCN (IM) demanded that government of Nagaland to be responsible for education. Government's response is positive and agreed by stating that "Education in Nagaland would be exclusive responsibility of Govt. of Nagaland subject to condition that they adopt standards laid down by Government of India regarding technical and higher education." But there is no reaction against the central sponsored schemes.

Treaty Making Powers:

The present constitutional scheme with regard to treaty making power being exclusively in the domain of the union executive needs to be urgently reviewed. The constitution should be amended to make legislative sanction mandatory for any international treaty. Besides, several international treaties like WTO agreement have serious implications for the states, especially with respect to state subjects like agriculture. In all such cases, consultation with the states and concurrence of the Inter-State Council must also be made mandatory.

In case of NSCN (IM)'s position on economy and relationship with other countries, Nagaland will have authority to enter into economic and trade relations with other countries. Nevertheless a special economic relationship could be agreed upon between India and Nagaland. The economic policy of Nagaland will be formulated and managed in close consultation with the Government of India as long as it is deemed mutually beneficial.

All India Services:
The All India Services are under the exclusive domain of the centre. Some of the powers can be sphered with the states. The state government should specially have a greater role in the administration of the Rules and Regulations of All India Services. According to their on going talk the Nagaland will have its own Civil Service, responsible for its own government. But the Govt. of India's position as conveyed during negotiation is same as which is being practice in other states. GoI conveyed that Nagaland shall have its own civil service. The number of All India Services officers to be posted in Nagaland and their tenure at different levels in Nagaland, will be decided in consultation with the Government of Nagaland. The members of the Nagaland civil services will have the right to be considered for promotion to the All India Services.

Financial Sphere Unresolved Issue:
Fiscal federalism in India has always been deeply problematic, with vertical and horizontal imbalance not only persisting till date but also getting aggravated in many cases. Resources have always remained as centralized in the hands of the union government with the states suffering from gross inadequacy of resources in relation to their development needs. The already limited financial and economic decision making powers of the states have got further constrain in the post-liberlisation period.

Vertical Imbalance: The basic imbalance in the Indian constitution with regard to centre-state relations arises out of the fact that, while the major responsibilities in the sphere of development expenditure (irrigation, roads, power, education, health,etc.) and administrative expenditure (law and order, general administration,etc.) have been given to the states, the more important powers of revenue-raising have been given to the centre. In the year 2004-05 for instance, annual development expenditure borned by the states taken together was Rs. 3.62 lakh crores which was more than one and a half times of what was borned by the centre Rs. 2.33 lakh crores. This also implies that the states undertook around 60.8% of the total development expenditure incurred in 2004-05. It also needs to be noted here that this expenditure was incurred by the states under serious financial constraints, and the actual expenditure that is required to fulfill their responsibilities adequately would be least twice the amount RBI Handbook of statics on Indian Economy, 2005-06 that was spent. In contrast, the share of the states in total revenue receipts was merely 38%, with around 62% going to the central government. This vertical imbalance remains the basic problem in centre-state financial relations.

Inadequate Central Transfer: This mismatch between the greater responsibilities for undertaking development expenditure lying with the states on the one hand, with greater powers of revenue mobilization lying with the centre on the other, has not been met through commensurate resource transfers from the centre to the states. The devolution of central taxes and grants as was envisaged in chapter 1 of the part xii and Article 275 of the constitution have remained grossly inadequate. In fact, the share of net central transfer in terms of devolution of central taxes and grants (net of interest payment by the states or centrally imposed loans) as a proportion of total revenue receipts of the centre has fallen from 32.7% in 1990-91 to 29.5% in 2004-05.

Devolution of 50% Of Central taxes to States: It is essential to work out a fair principle for sharing of central taxes with the states. The central taxes net of transfer to the states and the state taxes including states' share in central taxes should be in proportion to the development expenditures incurred by the centre and the states respectively. On the basis of this principle and the available data on the trend of existing as well as the required development expenditure of the states, it had been worked out that the state's share of central tax revenue should be at least 50%. The states, over a long period, have therefore been demanding that 50% of the total pool of collection of central taxes be developed to the states. However, this demand has been ignored so far and the states' share of central taxes currently stands at 30.5% only. This needs to be increased to 50% on an urgent basis.

Residual Powers of Taxation: The states had justifiably demanded the transfer of at least the residual powers of taxation, particularly the power to tax services, to the states. Ignoring this demand, the centre acquired for itself the entire power of taxing services through a constitutional amendment. Fairness demands that the states are allowed to tax certain services including some services, which are currently being taxed by the centre, central surcharges and ceases do not form a part of the divisible pool, thus denying the states their due share in total revenue receipts. These surcharges and ceases should also be made a part of the divisible pools. There is also a need to evolve a suitable model for the proposed goods and services tax so that the states have a fair share in the revenues especially keeping in mind the interests of the special category states (Jain. SN, 1985).

Restriction on Borrowing by States: The share of total market borrowing to which the state may be entitled is also dictated by the centre. While in the 1950s, the share of market borrowing by the Government were approximately equal in proportion, the share of market borrowing of the states has now fallen sharply to around 15%, with more than 85% of the market borrowing being cornered by the centre. Consistent with the development responsibilities of the states, the share of market borrowing of the states should be increased from the absurdly low proportion of about 15% per cent currently to 50%. Moreover, Article 293 of the constitution should be amended to provide more flexibility and autonomy to the states in regard to market borrowing.

The Reserve Bank of India restrains the state governments' flexibility in market borrowing in a number of ways. It denies access to the market for resources beyond limits, ranging from 5% to 35% of gross borrowings, depending on the fiscal indicators of the state. The most restrictive condition imposed by the RBI is that market borrowing cannot be used to finance revenue deficits. This ignores the fact that state finances are in doldrums largely on account of high interest – debt from the central government. Another perverse condition makes the amount that can be borrowed inversely proportional to the need, i.e. the size of the deficit. Furthermore, the RBI has undermined state government guarantees by stating that these should not be a key consideration in loans to the public sector. These constrains, which adversely affect the public borrowing of the states, need to be removed.

The position of Nagaland regarding taxation and customs is in favour of state. They demanded that government of Nagaland will have the authority to levy income and other taxes on citizens and residents of Nagaland. It shall also have the authority to set the level of taxes for individuals and corporations, which have powers to levy excise and sales tax. Furthermore Government of India not to levy duties on goods in transit destined for Nagaland. A special arrangement should also be made with respect to exemption of central excise and sales tax for goods manufactured in India and destined for Nagaland.

Present position of Government of India and its response is agreed with them by mentioning that - To the extent such taxes, duties and levies are not subsumed in the Goods and Services Taxes, the state government will be competent to levy land revenue, tax on agricultural income, tax on land and building, mineral rights, excise duty on alcoholic liquors for human consumption and narcotics, entry tax on goods into local area, tax on consumption or sale of electricity. Sales Tax/ VAT, taxes on professionals, taxes on luxuries, entertainment, amusements and betting and gambling, taxes on mechanical and other vehicles, taxes on animals and goats, taxes on goods and passengers carried by road or inland waterways, stamp duties on documents other than those mentioned in Entry 91 of List 1.

To be continued...

REFERENCES

- Gourachandra, Political Development in Manipur (1984-2002), Unpublished Thesis, Submitted to M.U.
- Patrick Hoenig is Visiting Professor at the Academy of International Studies, Jamia Millia Islamia, New Delhi. He is currently working on a project on federalism and identity in India, with a special emphasis on Jammu and Kashmir and Northeast India.
- Dhanabir Laishram, The Stitch, Akansha Publishing House, New Delhi, 2009.
- Dhanabir Laishram, The Middle Space, Akansha Publishing House, New Delhi, 2011.
- Jain S.N., Allocation of Taxing Power Between the Centre and the State, N.Sanajaoba(Ed) Basic Issues on Centre-State relation, Omson Publications, Gauhati, 1985.
- Approach Paper on Restricting of Centre-State Relation – A dopted by the Central Committee of the CPI(M) at its meeting held at Kolkata from October 12-14-2008.
- State Finance, Reserve Bank of India, Nov,2006; Handbook of Statistics on India Economy and Report of the 11th Finance Commission, June 2000.
- The Gist of Status of Discussions and Negociations on Various Issues Submitted By NSCN(IM) 2011.
- The Hindu, August 10,2009.
- The Sentinel, April 12, 2012.
- The Sangai Express
- The Seven Sister' Post.