www.gradeup.

co
www.gradeup.co

Centre-State & Inter-State Relationship

Centre-State Relations
“Though the country and the people may be divided into different states for convenience of
administration, the country is one integral whole, its people a single people living under a
single imperium derived from a single source.”
- Dr B.R.Ambedkar
India has a history of colonial rule, suppressed liberties and economic exploitation and in
order to deal with that our Founding Fathers opted for a ‘Union of States’ with a strong
Centre to make sure that the country did not have to suffer any challenge to its integrity
again.
Trends of Centre-State Relations
The first phase (1950-67)
This period was marked by the Congress party 's supremacy both at the center and in the
states.

• charismatic leadership of Nehru

• The issues in centre-state relations were resolved as internal issue of party.
The Second Phase (1967-77)
Fourth general election brought changes in federalism
- dramatically reduced the Congress Party's dominant majority to a simple majority in the
centre.
- Nearly half the Indian states fell to the opposition or coalitions.
- The period saw the emergence of state assertion.
Congress party attempted to regain political power by engineering defections, including
Article 356.
The emergence of regional powers to fill the void created by the weakening of the Congress
party was an important factor during this period. Mrs. Gandhi used the power of Congress
to make the Centre stronger and the infamous 42nd constitutional amendment made the
Centre stronger at the detriment of the states. The process of centralization resulted in the
infamous 1975-77 Emergency.
The Third Phase (1977-89)
The 1977 election saw the Congress, for the first time since independence, lose power in the
Centre.

• It brought to power the Janata Party which believed in economic and political power
being decentralized.
• State governments were dismissed ruled by opponents.
www.gradeup.co

• Sarkaria Commission: Centre-State relations.

1989 Onwards: The Era of Multi-Party System
1989 general election ended one party rule at the Centre and marked the beginning of
coalition government at the Centre.
The regional parties, hence, gradually became part and parcel of the cabinet of the coalition
and have thus begun to play a decisive role at the central level.
The most recent is the move to abrogate Art. 370 to fully integrate the state of Jammu
Kashmir and Ladakh. It transformed a state into Union Territories thus sparking of new
debates on centre-state relations.

Centre- State Relations

Relations between center and state are studied from three perspectives -

• Legislative Relations Section (245-255)

• Administrative Relations Section (256-263)
• Financial Relations Section (268-293)
Legislative Relations
The Union State relations in the legislative sphere have been dealt by Articles 245 to 255.
Territorial extent:
The Parliament has the power to create or amend laws for the whole or any part of the
territory of India.
The territory of India comprises the states, UTs and any other area for the time being
included in the territory of India. While the state legislature can make laws for whole or any
part of the state.
Additionally, The Parliament can solely make ‘extra-territorial legislations’ thus the laws of
the Parliament are applicable to the citizens of India and their properties in any part of the
world.
Distribution of Legislative subjects:
The union can exclusively make laws on subjects in Union List, States can exclusively make
laws on subjects in the state list, and both union and states can make laws on Concurrent
list, but the laws of the Union will prevail. The constitution has vested the residuary powers
(subjects not enumerated in any of the three Lists) with the Union Parliament.
Parliamentary legislation in the state field:
Can be in the following 5 circumstances: -

1. If Rajya Sabha passes a resolution in the national interest (Art.249)

2. Under Proclamation of National Emergency (Art.250)
www.gradeup.co

3. To Implement international agreements (Art. 253)

4. When states make a request (Art. 252)
5. Under Proclamation of Presidents Rule (Art. 356)

Centre's control over State Legislation:

The Constitution has empowered the centre to exercise control over the state’s legislature
in certain cases in the following manner:

1. The governor can reserve certain kinds of bills that are passed by the state
legislature for consideration of the President, and the President has an absolute veto
over such bills.
2. Bills on such matters that are present in the State List can be tabled in the state
legislature only with the initial sanction of the President such as imposing a
restriction on freedom of trade & commerce.
3. The President can give direction to the states for reserving money bills and other
such finance bills passed by the state legislatures for his/her consideration during a
financial emergency.

ADMINISTRATIVE RELATIONS
Part XI –Article 256-263
Article 256 mandates that the executive powers of each State shall be exercised in such a
way as to ensure conformity with the laws of the Parliament and with all existing laws
applicable in that State, and that the executive powers of the Union shall apply to the State
which may appear to be appropriate for that reason to the Government of India.
If a state does not act as per the guidelines of the Constitution, President's rule can be
imposed on the state under Article 365.
The Inter-State Council (Chairman: Prime Minister)
It is a non-permanent constitutional body set up by a presidential order on the basis of
Article 263.
The body was formed by a Presidential Order dated 28 May 1990 on recommendation of
Sarkaria Commission. The Council is formed to discuss or investigate policies, subjects of
common interest, and disputes among states.
All India Service - Art 312
State Public Service Commission - The Chairman and members of the State Public Service
Commission are appointed by the Governor, but they can be removed only by President.
The Joint States Public Service Commission can be constituted by Parliament at the request
of two or more legislatures, but its members and Chairman would be appointed by the
President.
Emergency provision
Article 352: In case of national emergency, all the powers of the states come to the center.
www.gradeup.co

Article 356 - In the event of President's rule, all the powers of the states come to the
President.
Article 360: Financial Emergency
FINANCIAL RELATIONS
Articles - 268 to 293 in the Part-12 of the constitution refer to the financial relations
between the Center and the States, whose provisions have been taken from the
Government of India Act - 1935
Article 275 makes provisions for statutory grants to needy states
These are charged on Consolidated Fund of India.
Finance Commission (Art. 280): is constituted every 5 years by the President for
redistribution of tax revenue among centre and states.
The Finance Commission recommends the President as to: -

1. The distribution between the Union & the States of the net proceeds of the taxes to
be divided between them and allocation between the States of respective shares of
such proceeds;
2. The principles which should govern grants-in-aid of the revenues of the States out of
the Consolidated Fund of India;
3. Measures that are needed to augment the Consolidated Fund of State so as to
supplement the resources of the Panchayats as well as Municipalities in the State;
4. Any other matters referred to the Commission by the President in the interest of
sound finance.

The Goods and Services Tax was applied across the country from 1 July 2017. (101st
Amendment Act of the Constitution of India). It has subsumed majority of the indirect taxes
– service, excise, octroi, sales tax, for the purpose of creating ‘One Nation, One Market’.

Art. 279A: The GST Council was formed as a constitutional body involving the Centre and
the States to sort out issues related to its implementation
According to the government, there are many benefits of GST system:

• GST is implemented through a fully computer-based system. As such, it promotes

easy compliance and transparency.
• Uniformity of tax rates and structures.
• Abolition of taxation effect on taxes.
• Reducing transaction costs in doing business will lead to improvement in business
competitiveness.
• Also, manufacturers and exporters are expected to benefit from this.
• The tax burden falling on consumers will decrease.
• Also, the prices of goods and services will also decrease.
www.gradeup.co

Financial relationship in case of emergency

In the event of National Emergency being implemented under Article 352, the President can
reduce or stop the distribution of revenue between the center and the state.
In President's Rule under Article 356/365, the Parliament concerned exercises the
legislative powers of the respective state, the state cabinet expires, and the entire executive
power comes to the President. This power is exercised by the President through the
Governor or other authority.
Under Article 360, in the event of a financial emergency, the Center can direct the states to
reduce the salary and allowances of all the people engaged in the service of the state and all
the money bills and finance bills of the President can be reserved for acceptance.
Reasons of Conflicts between Centre and State
1. Appointment of Governor and his role
2. Misuse of Article 356
3. Deployment of central forces in states
4. Discrimination among states in case of allocation of funds
5. All India Services
6. Encroachment of Centre on state subjects.
Sarkaria Commission
The Sarkaria Commission was formed by the central government in 1983 in order to
examine the centre-state relationship in various fields and provides suggestion within the
constitutional framework. The Commission submitted its report in 1988, with the following
recommendations: -

1. Uses of article 356 of the constitution should be made sparingly, and all possibilities
for forming an alternative government should be explored before imposing Article
356 in the state. The state assembly must not be dissolved unless the proclamation is
approved by the parliament.
2. Formation of the inter-governmental council consisting of the prime minister & chief
ministers of states to discuss collectively on various canons of governance that cause
friction between the centre and states.
3. It favoured for the determination of terms of reference of the finance commission in
consultation with the state governments and also setting up of similar expert bodies
at the state level was suggested.
4. The high courts' judges should not be transferred without their consent.
5. The three-language formula must be implemented in its true spirit in all the parts of
India.

Punchi Commission
The Government of India constituted the Punchi Commission in 2007 to examine centre-
state relations. Commission was chaired by the former Chief Justice of India M.M. Punchi. It
submitted the report in 2009 with the following recommendations:
www.gradeup.co

1. It called for providing a fixed term of five years to the governors and also their
removal via the process of impeachment (similar to that of the President) by the
State Legislature.
2. The governor should have the power to sanction prosecution of a minister against
the advice of the council of ministers.
3. It called for amending Articles 355 and 356 to enable the centre to bring specific
trouble-torn areas under its rule for a limited period. Hence, it proposed ‘localising
emergency provisions’ under which either a district or parts of a district can be
brought under the central government instead of the whole state, a further Such an
emergency should not be for more than three months.
4. It proposed that the Centre should have the power to deploy its forces in case of
communal conflagration without the state’s consent for a short period of a week.

The Constitutional scheme is sound in its fundamentals and can withstand the challenges
thrown up by globalisation, technological developments and security threats, provided
political leadership at the Central, State and local levels organise governance in the spirit of
the Constitution.

Inter-State Relations
INTRODUCTION –
The functioning of the Indian federal system depends not only on the close cooperation
between the Centre and the states but also between the states. The Constitution of India
makes several provisions with regards to the inter-state relationships, these are:
1. The adjudication of inter-state water disputes.
2. The coordination of inter-state councils.
3. Freedom of inter-state trade, commerce and intercourse.
4. Mutual recognition of public acts, records and judicial proceedings.
NOTE - The zonal councils have been established by the Indian Parliament to promote inter-
state coordination and cooperation.
INTER-STATE WATER DISPUTES
Article 262 of the Constitution deals with the adjudication of inter-state water disputes. It
makes two provisions:
(i) The Parliament of India may by law provide for the adjudication of any dispute or
complaint with respect to the use, distribution and control of waters of any inter-
state river and river valley.
(ii) The Parliament of India may also provide that neither the Supreme Court nor any
other court is to exercise jurisdiction in respect of any such dispute or complaint.

Under this provision, the Parliament has enacted two laws, namely, the River
Boards Act (1956) and the Inter-State Water Disputes Act (1956).
www.gradeup.co

The River Boards Act

➢ It provides for the establishment of the river boards for the regulation and
development of inter-state river and river valleys.
➢ A river board is established by the Central government on the request of the state
governments.
➢ The decision of the tribunal would be final and binding on all the parties to the
dispute.
➢ Neither the Supreme Court nor any other court is to have jurisdiction in respect of
any water disputes.
➢ Till 2019, the Central government of India has set up nine inter-state water dispute
tribunals. The details of the tribunals are mentioned below:

Inter-State Water Dispute Tribunals

Serial Name Set-up in Involvement of States

No. (Year)
1. Krishna Water Disputes Tribunal-I 1969 Karnataka, Maharashtra,
and Andhra Pradesh

2. Godavari Water Disputes Tribunal 1969 Karnataka, Maharashtra,

Madhya Pradesh, Andhra
Pradesh, and Odisha

3. Narmada Water Disputes Tribunal 1969 Madhya Pradesh, Gujarat,

Rajasthan, and
Maharashtra

4. Ravi and Beas Water Disputes 1986 Rajasthan, Haryana, and

Tribunal Punjab,

5. Cauvery Water Disputes Tribunal 1990 Kerala, Tamil Nadu,

Karnataka, and Puducherry

6. Krishna Water Disputes Tribunal-II 2004 Karnataka, Maharashtra,

and Andhra Pradesh

7. Vansadhara Water Disputes 2010 Andhra Pradesh, and

Tribunal Odisha

8. Mahadayi Water Disputes 2010 Maharashtra, Goa, and

Tribunal Karnataka

9. Mahanadi Water Disputes 2018 Chhattisgarh, and Odisha

Tribunal
www.gradeup.co

INTER-STATE COUNCILS
Article 263 deals with the establishment of an Inter-State Council to bring in coordination
between the states, between the Centre and the states.
➢ The President can establish the Inter-State Council if at any time it appears to him
that the public interest would be served by its establishment.
➢ He can define the nature of duties to be performed by such a council and its
organization and procedure. Article 263 specifies the duties that can be assigned to it
in the following manner:
(a) Enquiring into and advising upon disputes which may arise between states;
(b) Investigating and discussing subjects in which the states or the Centre and the
states have a common interest; and
(c) Making recommendations upon any such subject, and particularly for the better
coordination of policy and action on it.
Under the above provisions of Article 263, the President has established the following
councils to make recommendations for the better coordination of policy and action in the
related subjects:
• Central Council of Health and Family Welfare.
• Central Council of Local Government
• Four Regional Councils for Sales Tax for the Northern, Eastern, Western and Southern
Zones
NOTE –
In pursuance of the recommendations of the Sarkaria Commission (1983-88), the Janata Dal
Government headed by V. P. Singh established the Inter-State Council in 1990. It consists of
the following members:
(i) Prime Minister as the Chairman
(ii) Chief ministers of all the states
(iii) Chief ministers of union territories having legislative assemblies
(iv) Administrators of union territories not having legislative assemblies
(v) Governors of States under President’s rule
(vi) Six central cabinet ministers, including the Home Minister, to be nominated by
the Prime Minister.
(vii) Five Ministers of Cabinet rank / Minister of State (independent charge)
nominated by the Chairman of the Council (i.e., Prime Minister) are permanent
invitees to the Council.

➢ Council may meet at least thrice in a year. Its meetings are held in camera, and all
questions are decided by consensus.
www.gradeup.co

➢ There is also a Standing Committee of the Council. Its members are Union HM
(Chairman), 5 Union Cabinet Ministers and 9 CMs.
➢ The council is assisted by a Secretariat which also serves as the secretariat for the
zonal councils.

INTER-STATE TRADE AND COMMERCE

Article 301 to 307 in Part XIII of the Constitution deal with the trade, commerce and
intercourse within the territory of India.
Article 301
➢ It declares that trade, commerce and intercourse throughout the territory of India
shall be free.
➢ The purpose of this provision is to break down the border barriers between the
states and to create one unit with a view to encouraging the free flow of trade,
commerce and intercourse in the country.
➢ The freedom under this provision is not confined to interstate trade, commerce and
intercourse but also extends to intra-state trade, commerce and intercourse.

The freedom guaranteed by Article 301 is a freedom from all restrictions, except those
which are provided for in the other provisions (Articles 302 to 305) of Part XIII of the
Constitution itself. These are explained below:
(i) Parliament can impose restrictions on the freedom of trade, commerce, and
intercourse between the states.
(ii) The legislature of a state can impose reasonable restrictions on the freedom of
trade, commerce and intercourse with that state or within that state in the public
interest.
(iii) The legislature of a state can impose on goods imported from other states or the
union territories any tax to which similar goods manufactured in that state are
subject.
(iv) The freedom (under Article 301) is subject to the nationalization laws (i.e., laws
providing for monopolies in favour of the Centre or the states).

PUBLIC ACTS, RECORDS AND JUDICIAL PROCEEDINGS

Under the Constitution, the jurisdiction of each state is confined to its own territory. Hence,
it is possible that the acts and records of one state may not be recognized in another state.
To remove any such difficulty, the Constitution contains the “Full Faith and Credit” clause
which lays down the following:
(i) Full faith and credit are to be given throughout the territory of India to public
acts, records and judicial proceedings of the Centre and every state.
www.gradeup.co

(ii) The manner in which and the conditions under which such acts, records and
proceedings are to be proved and their effect determined would be as provided
by the laws of Parliament.
(iii) Final judgments and orders of civil courts in any part of India are capable of
execution anywhere within India (without the necessity of a fresh suit upon the
judgment). The rule applies only to civil judgments and not to criminal
judgments.

ZONAL COUNCILS
The Zonal Councils are the statutory (and not the constitutional) bodies. They are
established by an Act of the Parliament, i.e., States Reorganisation Act of 1956.
Each Zonal Council consists of the following members, these are:
➢ Union Home Minister
➢ Chief Ministers of all the States in the zone.
➢ Two other ministers from each state in the zone.
➢ Administrator of each Union Territory in the zone.

Besides this, the following persons can be associated with the Zonal Council as advisors,
these are:
(i) A person nominated by the Planning Commission (which is now replaced by NITI
Aayog);
(ii) Chief Secretary of the government of each state in the zone; and
(iii) Development Commissioner of each state in the zone.

Note – The Home Minister of Central government is the common Chairman of all five
zonal councils.
The functions of the zonal councils are:
➢ To achieve an emotional integration of the country.
➢ To help in arresting the growth of acute state-consciousness, regionalism, linguism
and particularistic trends.
➢ To help in removing the after-effects of separation.
➢ To enable the Centre and states to cooperate with each other in social and economic
matters.
➢ To cooperate with each other in the successful and speedy execution of major
development projects.

NOTE - North-Eastern Council was created by a separate Act of Parliament– the North-
Eastern Council Act of 1971. Its members include Assam, Manipur, Mizoram, Arunachal
Pradesh, Nagaland, Meghalaya, Tripura and Sikkim.
www.gradeup.co

DIVISIONS OF ZONAL COUNCILS

NAME MEMBERS HEADQUARTERS

Northern Zonal Himachal Pradesh, Haryana, Punjab, New Delhi
Council Rajasthan, Delhi, Chandigarh, Jammu
and Kashmir and Ladakh
Central Zonal Uttar Pradesh, Uttarakhand, Allahabad
Council Chhattisgarh, and Madhya Pradesh
Eastern Zonal Bihar, Jharkhand, West Bengal and Kolkata
Council Odisha
Western Zonal Gujarat, Maharashtra, Goa, Dadra and Mumbai
Council Nagar Haveli and Daman and Diu
Southern Zonal Andhra Pradesh, Telangana, Karnataka, Chennai
Council Tamil Nadu, Kerala and Puducherry

Articles Related to Inter-State Relations

BASIS ARTICLE SUBJECT

Mutual Recognition 261 Public acts, records and judicial
of Public Acts, etc. proceedings
Disputes Relating to 262 Adjudication of disputes relating to waters
Waters of inter-state rivers or river valleys
Coordination 263 Provisions with respect to an inter-state
between States council
Inter-State Trade and 301 Freedom of trade, commerce and
Commerce intercourse
302 Power of Parliament to impose
restrictions on trade, commerce and
intercourse
303 Restrictions on the legislative powers of
the Union and of the states with regard to
trade and commerce
304 Restrictions on trade, commerce and
intercourse among states
305 Saving of existing laws and laws providing
for state monopolies
306 Power of certain states in Part B of the
First Schedule to impose restrictions on
trade and commerce (Repealed)
307 Appointment of authority for carrying out
the purposes of Articles 301 to 304

NOTE –
www.gradeup.co

➢ The Parliament has made the Essential Commodities Act (1955). This Act enables the
Central government to control the production, supply and distribution of certain
essential commodities like petroleum, coal, iron and steel.
➢ In 2002, Sikkim was added as the eighth member of the North-Eastern Council.