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Topic: District Administration since Independence: Union-state-local Relations

The 73rd Constitution Amendment Act and the 74th Amendment Act provided directions for creating Panchayats in the rural areas and Municipalities in the urban regions. Their composition varies with the proportion to the ratio between the population of the rural and urban areas of state. Article 243 of the Constitution of India provides the states to empower these Panchayats and Municipalities “with sue power and authority as may be necessary to enable them to function as Institution of self-government’ !n Indian context we noticed earlier union-state relation because local government were not give constitutional status before the passage of 73rd constitutional amendment act in 1992.

Three Models

There are three models depicting union-state-local relation

  • Coordinate Authority Model
  • Inclusive Authority Model
  • Overlapping Authority Model

Coordinate Authority Model

  • Union and state governments are essentially equal
  • Union and state governments are autonomous within their own spheres
  • A sharp boundary separates Union and state authority-neither intrudes on the other’s business
  • Local government and state government comprise a unitary system

Criticisms of the Coordinate Authority Model

  • There is no sharp boundary between Union authority and state authority as this model implies
  • If anything, the majority of powers are concurrent, shared by Union and state government.
  • The flow of power in the intergovernmental system is not unidirectional from the states to the localities. States have legal power over localities, but localities balance state power by having political power.

Inclusive Authority Model

  • In fact it is a centralized system where Union government dominates.
  • In this model State and Local governments depend on the centre for its powers.
  • It is based on the principles of hierarchy with union government at apex and local government at bottom.

Criticisms of the Inclusive Authority Model

  • Growth in government employment has been almost entirely at the state and local level
  • Combined state and local budgets are now almost equal to the federal budget

Overlapping Authority Model

  • Power is widely dispersed.
  • Levels of Government are interdependent.
  • Each level of government has lim.ted areas of exclusive autonomy

Relationships between governments in the modern era tend to be both competitive and cooperative

Whereas currently the concept of ‘network governance’ is given emphasis which requires concentrated efforts by plurality of agencies and functionaries.

Recent Trends in Constitutional Development in India

In the realm of federations, India is comparatively a new entrant. The present federal set-up in India, is the outcome of a lengthy process of decentralisation that can be traced to the Lord Mayos’ scheme of decentralisation in 1887, earlier to which revenues and expenditures in India were completely centralised. Further developments during the British period in the direction of creation of federal set-up are, Lord Ripons’ amendments in the earlier scheme and the enactment of Government of India Act of 1912 and 1935 which transferred more powers to the provinces.

The fiscal arrangements under the 1935 Act were, more or less, on federal lines. The New Constitution that we adopted in 1950, embodies the characteristics of a federal constitution. The new constitution includes three lists, viz. Union, State and Concurrent. There is no separate list of taxes for local bodies which would continue to depend on the state legislatures to whatever taxation powers are given from the state list to local bodes. In the absence of clear cut demarcation of taxes between the state governments and local bodies, there have been frequent encroachments by the state governments in the legitimate domain of local bodies.

The Local Finance Enquiry Committee which reported in 1951, after a careful scrutiny of the problem of local finances, recommended that one tax from the Union List (item 89) , namely, terminal tax on goods and passengers carried by railways, sea and air and the following 12 taxes from the state list be reserved for the utilisation by or for local bodies:

1. Tax on land and buildings (item 49)
2. Tax on mineral rights subject to limits imposed by the Parliament relating to mineral development (item 50)
3. Taxes on entry of goods into local areas for consumption, use or sale (item 52)
4. Tax on consumption or sale of electricity (item 53)
5. Tax on advertisement other than published in newspapers (item 55)
6. Tax on goods and passengers carried by rail or inland waterways (item 56)
7. Taxes on vehicles other than those mechanically propelled (item 57)
8. Toll tax (item 59)
9. Tax on animals and boats. (item 58)
10. Taxes on profession, trade, callings and employment (item 60)
11. Capitation taxes (item 61)
12. Tax on entertainment, including amusements (item 62)

The Taxation Enquiry Commission (1953), besides examining the taxation structures of central and the state governments, also made an enquiry into the finances of local bodies and made comprehensive recommendations for improving their finances. The observation of the Commission in the context of local finances is very significant. “The incorporation in the Union list, of the terminal taxes on goods carried by railways, the limitations on account of profession tax leviable on any assessed and the immunity of Union properties from local taxation, has resulted in contraction of the powers of taxation and consequently of the potential resources of local bodies, and the inclusion of only two lists, viz. Union and State, has obliterated the legal distinction between the spheres of taxation of local bodies and state governments which has created new problems in regard to the devising of an adequate and satisfactory system of local taxation and local finance”. The Commission has pointed out the relative inelasticity of local finance in comparison to the state and central finances. Even the 73rd and 74th Constitutional amendments have not considered the issue of demarcating the sources of revenue between the state governments and local bodies.

However, the constitutional amendment Act, 1992, by making a provision for the constitution of State Finance Commission, under Article 243(i) and 243(y) after the expiry of every five years, for recommending devolution of resources from state government to local bodies, has altered the erstwhile fiscal arrangement between the state government and local bodies and has tried to rectify the imbalance.

The Constitutional Amendment Act gives local bodies a constitutional status, assigns them a number of functions, ensures them stability, provides a suitable framework to function with greater freedom and also makes institutional arrangements for devolution of finances from the state government to local bodies.

It is for the first time that unlike its predecessors, the XI Finance Commission was assigned certain, terms of reference relating to local bodies and their finances. The inclusion of certain issues relating to local finances in the Terms Of Reference of the Commission has added a new dimension to the character of fiscal federalism in India and also demonstrates the fact that the nation as a whole should feel interested in the financial health of local bodies and have a stake in the task of restructuring and strengthening local bodies as units of self-government.

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