ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

(/)
Subscribe (/Subscribe.Html) Donate (/Donation)

My Account (/User) Logout (/User/Logout)

Welcome National Law University Orissa. You have been automatically logged into Economic and Political Weekly.
You may also log in as another user (/user/logout) if required.

Reader Mode A+ | A | A-

COVID-19 and Dwindling Indian Federalism

Vol. 55, Issue No. 26-27, 27 Jun, 2020 (/journal/2020/26-27)
Commentary (/commentary)
Updated on 7 May 2021

Pankhuri Agrawal (/author/pankhuri-agrawal)

Download PDF Version (https://www.epw.in/system/files/pdf/2020_55/26-27/Com_PankhuriAgrawal_I_4July2020_Pages%2016-19.pdf)

One of the many effects of COVID-19 pandemic disaster is also visible on legislative, executive and financial federalism in India. The
constitutional mandate for functioning of centre on behalf of states has been missed and recourse to disaster has been taken to undertake
unified but unconsented measures.

Author is grateful to the reviewer at EPW for valuable comments and suggestions which haves enriched the article.

Under the Constitution of India, 1950, the entry 81 of Union List of Schedule VII allots the legislative field for “Inter-State migration; inter-
State quarantine” to the centre. The ­entries 1, 2 and 6 of the State List of Schedule VII allot the legislative field of “public order,” “police” and
“public health and sanitation; hospitals and dispensaries” to the states. The entries 23 and 29 of the Concurrent List allot the legislative field
of “social security and social insurance; employment and unemployment” and “prevention of the extension from one state to another of
infectious or contagious diseases or pests affecting men, animals or plants” to the centre and states. The executive power of the union and
states is “coextensive with the legislative power” under Articles 73 and 162 respectively. It means that constitutionally speaking, during the
COVID-19 pandemic, the centre has the power to legislate and execute the laws and policies with respect to interstate migration, interstate
quarantine, social security and social insurance, employment and prevention of the spread of infection in the country; and the states have the
legislative and executive power in the area of public order, police, public health, sanitation, hospitals, social security, and containment of
infection.

The Ministry of Home Affairs (Disa­ster Management Division) has through its Order No 33–4/2020–NDM–I declared the spread of COVID-19
as a “notified disaster for the purpose of providing assistance under SDRF” (GOI 2020a). The subject area of “disaster” is missing in all the
three lists of Schedule VII, leaving the option for the centre to use its residuary power under entry 97 of the List I. But, in 2005, the centre
enacted the Disaster Management Act (DMA) deriving its powers ­under entry 23 of List III. The very idea of Concurrent List is to provide for
cooperative efforts of centre and states, and therefore, it was a wise decision on the part of centre to not invoke its residuary powers. With the
legislations framed under entries of the Concurrent List, there is an added obligation on the centre to bestow equal powers and obligations on
the states. The Schedule VII is one of the significant elements of Indian federalism and the highest court of the land in its historic case of
Kesavananda Bharati v State of Kerala in 1976 has declared federalism as the basic structure of the Constitution. In this light, it is important
to reread entry 23 of List III, that is, “social security and social insurance; employment and unemployment” to ­understand the inefficiency of
the requisite powers in times of disaster for both the centre and states. It shows that the role of the DMA is limited and restricted in a disaster
like situation in India and hence the powers of centre and states should remain intact as highlighted above in several entries read with Article
248 of the Constitution. Further, under Section 11 of DMA the national plan to deal with epidemic has to be prepared “in consultation with
state governments and other expert bodies in the field of disaster management” which in the present COVID-19 pandemic is missing, by
nullifying the role of the states in formulating a common agreeable plan completely. And interestingly, the central government has declared
the national lockdown successively and that too without any national plan.

Disasters and Legal Framework

The DMA under Section 3 constitutes the National Disaster Management Authority (NDMA) with the Prime Minister as ex officio chairperson
and its nominees. Interestingly the powers and functions of the NDMA as provided under Section 6 are related with “laying down the policies,
plans and guidelines for disaster management” along with the power under Section 6(2)(i) to “take such other measures for the prevention of
disaster, or the mitigation, or preparedness and capacity building for dealing with the threatening disaster situation or disaster as it may
consider necessary.” Also, the power of the chairperson under Section 6(3) “in the case of emergency … to exercise all or any of the powers of
the National Authority” is subject to “to ex post facto ratification by the National Authority.” The similar provisions are also made for State
Disaster Management Authority and District Disaster Management Authority with the chief minister and collector/district magistrate/deputy
commissioner as ex officio chairperson res­pectively. The National Disaster Res­ponse Fund is constituted by the central government and is
made available to the National Executive Committee under Section 46 with the following sources:

(a) “an amount which the central government may, after due appropriation made by Parliament by law in this behalf provide;

(b) any grants that may be made by any person or institution for the purpose of disaster management.”

Likewise, State Disaster Response Fund and District Disaster Response Fund is also constituted under Section 48 of the act but with no clarity
over the amount which could be credited to it. The act also has an overriding effect clause under Section 72 wherein “the provisions of this
Act, shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any
instrument having effect by virtue of any law other than this Act.”

The Epidemic Diseases Act (EDA), 1897 was framed “to provide for the better prevention of the spread of Dangerous Epidemic Diseases.” The
EDA under Section 2 provides ample powers to the state governments “to take special measures and prescribe regulations as to dangerous
epidemic disease,” which include “the inspection of persons … the segregation of persons suspected by the inspecting officer of being
infected with any such disease.” The EDA under Section 2A provides powers to the central government to “take measures and prescribe
regulations for the inspection of any ship or vessel … and for such detention thereof, or of any person intending to sail therein, or arriving
thereby, as may be necessary.” The Indian states have used their power under EDA to issue State Epidemic Diseases COVID-19, 2020
regulations for their states mandating the observance of lockdown by the residents and closure of various establishments, offices or other
places along with punishments under Section 188, 269, 270, and 271 of ­Indian Penal Code, 1860 for the violators.

The presence of both legislations, that is, the DMA and EDA, show that the states have the primary role in the epidemic-disaster-like
situation and the centre has guardian-like roles of policy framing, guidelines and monitoring the situation. Unfortunately, the practice of the
centre has been different as the Section 6(2)(i) of DMA has been used by it to give itself the sweeping powers in the times of disaster,
including epidemics. The simultaneous observance of the EDA and DMA maintains the federal relations between the centre and states as both
the governments get their due share of role in accordance with the enunciated fields of legislation in the Schedule VII. The actions of the
centre in subsuming all the legislative and executive functions to itself in difficult times of epidemic using merely one of the listed powers
and functions of NDMA is not worthy of any praise. The basic structure of the Constitution cannot be trampled upon by making an ­excuse of
disasters or pandemics. It is not being said here that the centre should take a back seat, but in fact the proposal is to involve the states equally
rather than imposing centre rules and policies on them. The Constitution itself provide the avenues to the centre to go astray from the path
of federalism under Articles 249, 250, 252, 352, 356, 360, etc. Therefore, a legislation made under an entry of the concurrent list should not be
misconstrued by the centre to impose emergency-like situations using colourable exercise of power and flouting the constitutional mandates
for the same.

Fiscal Federalism and CSR

After discussing the issues surrounding legislative and executive federalism in the country, it becomes important to analyse the status of
fiscal federalism also in the present COVID-19 pandemic situation. In this pandemic, the states are at the forefront as their functions include

monitoring the implementation of the lockdown, stepping up production of hand ­sanitisers and face masks, having food delivered to schoolchildren reliant on mid-day meals,
making arrangements to provide shelter, ration and financial assistance to families of daily-wage workers, setting up mental health helplines, and so on. (Maniktala 2020)

The revenue collection of the centre and states is impaired due to halting of the operation of industries and exchange of goods and services.
Further, the expenditure of the centre and states has also increased in an unplanned and unforeseeable manner. These expenditure heads
include, procurement of health infrastructure, protection kits, reimbursement of hospital charges, spending on travel, food and shelter of
unorganised workforce including migrant labourers. The estimated loss of central tax revenue `5 lakh crore of which the fiscal transfer to
states will suffer by around `3 lakh crore (Rao 2020). The tax revenue inclusive of states’ own collection and central transfer of its share, forms
around two-thirds of total revenue receipts of the states (Tiwari 2020). The states’ major source of revenue is first goods and services tax
(GST) for which the states themselves do not have the independent power to decide its rates even afterwards to compensate for the lost
revenue, second, sales tax which is already reduced due to availability of lesser items to the states after the GST Act and now further reduced
due to heavy travel ­restrictions in the country, and third, excise duty which has to face the wrath of any mishap in the country without proper
justification as to its proportional nexus with the containment measures. The mandate of GST (Compensation to States) Act, 2017 also seem
dismal in this pandemic as the cess levied on coal, ­tobacco and its products, pan masala, automobiles, and aerated drinks has also been
severely affected, jeopardising the availability of compensation to states and hampering the already crippled fiscal status of the states (Tiwari
2020).

Thus, the central government initiated the drive for seeking contribution from companies to deal with the financial strain in the country.
Interestingly, in view of the constitutionally mandated roles and functions of the state and central government as highlighted above, the state
governments, must have equal access to such voluntary contributions that is, Corporate social responsibility (CSR) funds as that of the central
government, in fact more so. The centre must coordinate the ways and means to achieve the fair and equal access and sharing of CSR funds
with the states rather than making the very linking cord between the companies and states look unappealing to the companies. It requires
basic knowledge of finance that the companies would contribute to those funds and activities which make them eligible to meet CSR
obligations as well. The Schedule VII of the Companies Act, 2013 provides an inclusive list of CSR activities for the companies. For the present
­COVID-19 pandemic, the following two entries are relevant for us:

(viii) contribution to the Prime Minister’s National Relief Fund or any other fund set up by the central govt for socio economic development and relief and welfare of the
Schedule Castes, Tribes, Other Backward Classes, minorities and women;

(xii) disaster management, including ­relief, rehabilitation and reconstruction activities.

It is clear that contribution to disaster management activities will qualify as CSR activities by the company. And thus, the PMNRF, Prime
Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund), Chief Minister Relief Fund (CMRF), National
Disaster Management Fund and State Disaster Management Fund should be included for the same purposes as they deal with “disaster
management.” But, the “COVID-19 ­related Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR)” by Ministry of
Corporate Affairs (MCA) has created confusions about the intention of the central government as it includes PM CARES Fund in it and not
CMRF, which makes the states’ fund less desirable option for the companies to contribute into. The vague and unreasonable ratio­nale
provided for inclusion of PM CARES Fund has been that it falls under the item No (viii) of Schedule VII of the Company Act, 2013 and for non-
inclusion of CMRF has been it does not fall under the Schedule VII at all. Even though the given rationale is acc­epted on ground of CMRF not
being a central fund, the reasoning for not to ­include it in item No (xii) of the Schedule VII has been unsatisfactorily left unanswered. The
intention for non-inclusion of CMRF in item No (xii) of the Schedule VII appears to be more dubious as the contributions to State Disaster
Management Authority have been considered worthy enough to be included in the same item. Interestingly, MCA has accepted in its
expressly written words that

…funds may be spent for various activities related to COVID-19 under items nos. (i) and (xii) of Schedule VII relating to promotion of health care including preventive health
care and sanitation, and disaster management. Further, as per general circular No 21/2014 dated 18 June 2014, items in Schedule VII are broad based and may be interpreted
liberally for this purpose. (GOI 2020b)

Also note that the Ministry of Home Affairs (Disaster Management ­Division) has declared the spread of COVID-19 as a “notified disaster for
the purpose of providing assistance under SDRF.”

The issue of non-inclusion of CMRF becomes graver in view of the ­entry 6 of List II, which provides legislative competence to the states in the
area of “public health and sanitation” and consideration of contributions to State Disaster Management Authority as CSR expenditure under
item No (xii) of Schedule VII of the Companies Act. The above discussion shows the intentional dwindling of fiscal federalism in India by the
centre. The states have the right to receive funds from their taxpayers, central government and institutional mechanisms created for the
same. The centre must not become one-stop collector of funds without any legal obligation to disburse the same to the states. The states
cannot become “atmanirbhar” without access to financial resources and avenues to enhance the same.

Transparency and Cooperation

One of the often cited reasons for creation of the very recent PM Cares Fund is that the PMNRF is an undemocratic fund solely at the disposal
of Prime Minister and is managed by the committee which includes private parties too. The PM Cares Fund1 is headed by the Prime Minister
as its ex officio chairperson and “Minister of Defence, Minister of Home Affairs and Minister of Finance, Government of India are ex-officio
Trustees of the Fund” with power to the chairperson to further “nominate three trustees to the Board of Trustees who shall be eminent
persons in the field of research, health, science, social work, law, public administration and philanthropy.” The tall claims reg­arding
democratic structure of PM Cares Fund in comparison to PMNRF could have been better justified with the inclusion of members of opposition
as well as its ex officio Trustees of the Fund. Interestingly the PM Cares Fund will not be audited by the Comptroller and Auditor General of
India but “by one or more qualified independent auditors who will be appointed by the Trustees” (Sharma 2020). The contributions to the PM
Cares Fund “qualify for 80G benefits for 100% exemption under the Income Tax Act, 1961,” has “got exemption under the FCRA” and will be
“be counted as Corporate Social Responsibility (CSR) expenditure under the Companies Act, 2013.” So, a public charitable trust is created by
the centre, managed by the central ministers and is to be audited by a person who is again appointed by the managers of the fund itself. The
cited reasons are not insufficient to question the extent of democracy, transparency, accountability and cooperative federalism preserved or
destroyed in both PM Cares and PMNRF.

Paquet and Schertzer’s theory of Complex Intergovernmental Problems (CIPs) requires presence of three characteristics: (a) problems are not
redressable by actions of single government, (b) “high levels of coordination and collaboration” is required among the governments, and (c)
the “problems challenge the existing norms and venues of intergovernmental relations” (Paquet and Schertzer 2020). The present situation of
COVID-19 poses the problem in the nature of CIP due to it being an epidemic which is uncontrollable by separate efforts of states and centre
and need financial support of the central government to perform the allotted functions in State List to the states. This issue cannot be
resolved by only looking through the lens of federalism, rather it requires the complementary functioning of the states and centre for a
common purpose. The centre need not assert itself over the states because then a void would be left without the legislative, executive and
emotional support of the states. The states should also avoid the feeling of “self-entitlement” to work together for its own people in a
sustainable manner.
Nobel laureate Abhijit Banerjee rece­ntly in an interview discussed the federal relations between the centre and state and has advised the
central government to not plan the lockdown activities and expenditure management for the states, and instead the primary lookout for the
centre should be to transfer money to the states to make them capable to revive their economy according their state-specific requirements. It
should be noted that the constitutional body of Fin­ance Commission also recommended fiscal transfer keeping the state priorities as one of
the factors for consideration and hence the centre should not arbitrarily legislate, execute or transfer money to the states according to its own
views and opinions about the states. The demands for relaxation of the mandated three percent fiscal deficit under Fiscal Res­pon­sibility
Management Act, 2003 should be considered by the centre in this ­exceptional situation.

Note

1 https://www.pmindia.gov.in/en/about-pm-cares-fund/

References

GoI (2020a): Order No 33-4/2020-NAM-I, Ministry of Home Affairs (Disaster Management Division), 14 March,
https://www.ndmindia.nic.in/images/gallery/Items%20and%20Norms%20of%20assistance%20(COVID-19).PDF.

— (2020b): “COVID-19 Related Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR),” Ministry of Corporate Affairs,
10 April, http://www.mca.gov.in/Ministry/pdf/Notification_10042020.pdf.

Maniktala, P (2020): “Diluting Federalism in the Fight against COVID-19 Pandemic,” Outlook India, 27 April,
https://www.outlookindia.com/website/story/opinion-diluting-federalism-in-the-
fight-against-coronavirus-pandemic/351586 (https://www.outlookindia.com/website/story/opinion-diluting-federalism-in-the-fight-against-
coronavirus-pandemic/351586).

Paquet, M and R Schertzer (2020): “COVID-19 as a Complex Intergovernmental Problem,” Canadian Journal of Political Science, Revue
Canadienne De Science Politique, 1–5 April, https://www.cambridge.org/core/services/aop-cambridge-
core/content/view/8F1CB8217949E5BCE0DC075A6B5DEAC3/S0008423920000281a.pdf/covid19_as_a_complex_intergovernmental_problem.pdf
(https://www.cambridge.org/core/services/aop-cambridge-
core/content/view/8F1CB8217949E5BCE0DC075A6B5DEAC3/S0008423920000281a.pdf/covid19_as_a_complex_intergovernmental_problem.pdf).

Rao, M G (2020): “Coronavirus: Financing the Covid-19 Response—Challenges and Choices,” Bloomberg Quint, 7 April,
https://www.bloombergquint.com/coronavirus-outbreak/financing-the-covid-19-response-challenges-and-choices
(https://www.bloombergquint.com/coronavirus-outbreak/financing-the-covid-19-response-challenges-and-choices).

Tiwari, S (2020): “Impact of Lockdown on Government Revenue,” PRS India, 19 April, https://www.prsindia.org/theprsblog/impact-lockdown-
government-revenue (https://www.prsindia.org/theprsblog/impact-lockdown-government-revenue).

More

Healthcare in India (/tags/healthcare-india)

Health Policy and Legislation (/tags/health-policy-and-legislation)

COVID-19 (/tags/covid-19)

Pandemic (/tags/pandemic)

Coronavirus (/tags/coronavirus)

COVID and States (/tags/covid-and-states)

COVID and Legislation (/tags/covid-and-legislation)

COVID and Governance (/tags/covid-and-governance)

Federalism (/tags/federalism)

Centre-state Relations (/tags/centre-state-relations)

Constitution of India (/tags/constitution-india)

Disaster Management (/tags/disaster-management)

Pankhuri Agrawal (pankhuri11agrawal@gmail.com (mailto:pankhuri11agrawal@gmail.com)) is a PhD scholar at NALSAR University of Law,

Hyderabad.
Download PDF Version (https://www.epw.in/system/files/pdf/2020_55/26-27/Com_PankhuriAgrawal_I_4July2020_Pages%2016-19.pdf)

Updated On : 7th May, 2021

 SUPPORT US
Your Support will ensure EPW’s financial viability and sustainability.

The EPW produces independent and public-spirited scholarship and analyses of contemporary affairs every week. EPW is one
of the few publications that keep alive the spirit of intellectual inquiry in the Indian media.

Often described as a publication with a “social conscience,” EPW has never shied away from taking strong editorial positions.
Our publication is free from political pressure, or commercial interests. Our editorial independence is our pride.

We rely on your support to continue the endeavour of highlighting the challenges faced by the disadvantaged, writings from
the margins, and scholarship on the most pertinent issues that concern contemporary Indian society.

Every contribution is valuable for our future.

Support the EPW

EPW

About Us (/about-us.html)
The Team (/the-team.html)
About Engage (/epw-engage-about-us)
For Contributors (/notes-contributors.html)
Opportunities (/openings)

Term & Policy

Terms and Conditions (https://www.epw.in/terms-conditions.html)

Copyright (https://www.epw.in/copyright.html)
Privacy Policy (https://www.epw.in/privacy.html)
Style Sheet (https://www.epw.in/style-sheet.html)

Circulation

Refund and Cancellation (https://www.epw.in/refund.html)

User Registration (https://www.epw.in/user-registration.html)
Delivery Policy (https://www.epw.in/delivery-policy.html)

Advertisement

Why Advertise in EPW? (https://www.epw.in/why-advertise.html)

Advertisement Tariffs (https://www.epw.in/tariffs.html)

Connect with us

Contact Us (/contact-us.html)

320-322, A to Z Industrial Estate, Ganpatrao Kadam Marg, Lower Parel, Mumbai, India 400 013
Phone: +91-22-40638282 | Fax: +91-22-24934515 | Email: Editorial - edit@epw.in (mailto:edit@epw.in) | Subscription - circulation@epw.in
(mailto:circulation@epw.in) | Advertisement - advertisement@epw.in (mailto:advertisement@epw.in)
Designed, developed and maintained by Yodasoft Technologies Pvt. Ltd. (https://www.yodasoft.com/)