Dismantling the Plan panel will not ring in fiscal federalism; govt needs to do more

Perhaps the most amusing statement on the government’s move to do something with the Planning Commission came from Kerala chief minister Oomen Chandy. In an interview to The Indian Express, he said “. . . the way it is being done, without consulting the chief ministers, undermines the federal structure.'

We’ll overlook the minor factual inaccuracy about the chief ministers not being consulted - wasn’t that the idea behind Sunday’s meeting? But terming as anti-federal a move to scrap an organisation that was the thin edge of the wedge to facilitate greater centralisation does boggle the mind a bit.

It is perhaps natural and understandable for Congress chief ministers to oppose the wholesale junking of the Planning Commission. But it doesn’t make sense for the government to dither on this any more, since most of the other states, especially those ruled by regional parties, seem to back the move.

A perhaps justifiable worry could be about what will happen to the role that the Planning Commission played as an arbiter between the Centre and the states in the case of disputes. Even its worst critics admit that this role is still relevant. The answer to this is not to give the Commission statutory status with the brief to address such issues. There are existing mechanisms - rather defunct, at present - that can be revived to take care of this.

There is the Inter-State Council, set up in 1990 under Article 263 of the Constitution. Right now, it is a recommendatory body to look into subjects in which states have a common interest, make recommendations on these, focussing particularly on better coordination of policy and action and deliberating on other matters of general interest. The Council, chaired by the Prime Minister, has all chief ministers of states and union territories as well as six union ministers as members.

But the Inter-State Council is practically a defunct body, admitting on its website that it “has met for only ten times [sic]”. The last time it met was in 2006. This, when the order setting it up says it has to meet at least thrice a year! The agenda of a majority of the meetings revolved around deliberating on the recommendations of the Justice R. S. Sarkaria Commission on Centre-state relations, 1988. Despite its existence (and a permanent secretariat housed in Vigyan Bhavan), a separate forum - empowered committee of state finance ministers-was set up to sort out knotty issues relating to both value added tax (VAT) and goods and services tax (GST).

When there is an institutional mechanism already in place, where the states have full representation, why is time being wasted on drawing up the contours of a new body? Why cannot the Inter-State Council sort out issues with inter-state ramifications, like GST, which may come up in the future?

It has a small secretariat, which can be merged with the Planning Commission’s larger secretariat with more expertise, which can provide the domain expertise on various issues. This has been proposed before. The Centre-State Relations Inquiry Committee headed by P. V. Rajamannar Committee had suggested that every Bill of national importance or which is likely to affect the interests of “one or more states” should be vetted by the Council before being tabled in Parliament and its views must also be submitted to Parliament.

The committee also said that, barring defence and external relations, no decision of national importance should be taken by the centre without consulting the Council. Even in the case of defence and external relations, the decision of the central government, it said, should be placed before the Council at the earliest. The Rajamannar committee also said the recommendations of the Council should be made ordinarily binding on both the Centre and states. If the Centre rejects any of its recommendations, it should place the recommendation and the reason for rejection before Parliament.

When there is already such a blueprint for a complete recast of Centre-state relations, why waste time in jawing about new institutions?

But there are other issues that need to be addressed if the Centre-state equation needs to be changed. These will remain valid even if a new, more democratic and federal institution is put in place.

In a chapter on excessive centralisation hampering the economic freedom of states in the annual Economic Freedom of the States of India 2013, Bibek Debroy flags the issue of the Centre not consulting states on key issues even on subjects in the concurrent list. This may perhaps be addressed if the Rajamannar committee’s recommendations are implemented faithfully.

The second issue Debroy highlights is the practice of the President (read, the central government) sitting on bills passed by state legislatures which require central sanction. “The system is completely open-ended, and this empowers the President-who acts on the advice of the union government-to put off approval or disapproval for as long as the union government feels like it, " writes Debroy.

He also notes that the system of the Centre appointing and removing governors and the discretionary powers of governors (which include dismissing state governments) militate against true federalism. Debroy argues that restricting the freedom of states also hampers their economic freedom.

Modi has been holding forth on changing the paradigm of Centre-state relations. Doing that should not just mean replacing the Planning Commission with a more representative body. It will involve a gamut of other actions as well. Is the government ready for that?

Seetha is a senior journalist and author