Centre, states relations worsen over farm bills, GST compensation

The opposition-ruled states’ stand mellowed somewhat after the Centre offered to borrow Rs 1.10 trillion towards compensation on their behalf. However, the union government’s move to invoke a tripartite agreement (TPA) to realise Rs 1,417.50 crore of power dues from Jharkhand has made at least that state reject the offer.

Though confined to one state, the recent move is among a series of actions by the Centre that have allegedly strained relations between the union government and the states.

The union recently auto-debited a sum of Rs 1,417.50 crore from Jharkhand’s consolidated account—- maintained by the RBI-—to pay for central power generator Damodar Valley Corporation’s (DVC) dues. This amount is the first installment of the Rs 5,600 crore Jharkhand owes to DVC for power supplied to seven of its districts.

For this purpose the union invoked the tripartite agreement signed between the union government, the Reserve Bank of India and the Jharkhand government on April 27, 2017.

“It is really unfortunate that the Centre is unable to pay compensation to states. To add to our woes, it is asking the RBI to debit money from the state’s consolidated fund,” said Jharkhand chief minister Hemant Soren.

Such misuse of power was never seen since Jharkhand was formed or even earlier, he said.

“This act is an attack on the federal structure,” Soren said.

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One major criticism of the newly passed three agriculture-related pieces of legislation– the trade Act, the contract farming Act and the amendments to the Essential Commodities Act–is that these allegedly infringe upon the rights and juridictions of the states.

The trade Act which regulated out of mandi transactions and lays down that states won’t be allowed to charge any fees on such deals has been roundly criticized by the states as gross violation of the constitutional rights of the state.

States such as Punjab and Kerala are planning to appeal against these pieces of legislation in the Supreme Court on the grounds that it violates the Constitution. Punjab will hold a special session of the state assembly in the next few days to discuss the three laws and also how the state’s interest is safeguarded.

The Congress-ruled Chhattisgarh is also reportedly working out a mechanism to ensure that the Central Acts don’t come into play. Even some non-Congress states such as West Bengal, Andhra Pradesh and Odisha have constituted committees to study the three laws and its impact on the farmers of their state.

The biggest problem is with the Trade Facilitation Act, which regulates agricultural transactions out of mandis and limits state powers to charge any tax or duty on them.

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Constitutional expert Subhash Kashyap said powers are distributed between the union and states and then there are some concurrent powers. “The union is within its power to do what it is doing. It is not violating the seventh schedule which provides for distribution of power. We can question the Centre only if the seventh schedule is violated,” he said.

Then, there have been objection by states to a proposal to allow land acquisition under the Coal Bearing Areas (CBA) Act, 1957. This would entail the Centre acquiring land and then giving it on lease to the miners.

States such as Chhattisgarh and Jharkhand and several local activist groups in these states started protesting against any amendment to the CBA Act. Several activists stated the amendment would take away the authority of the states on land and revenue garnered coming from it.

Then there are state’s reservations over the proposed union power ministry’s move to amend the Electricity Act, 2003 to enable turnaround of discoms. These include encouraging states to tie-up private franchisees for power supply, introduce Direct Benefit Transfer (DBT) of electricity subsidy and phase out cross-subsidy charges levied on industrial consumers.

But several states including Bihar, Rajasthan, West Bengal, Odisha and Kerala opposed this proposal citing threat of privatisation and increase in the rates of electricity.

S S Ahluwalia, advocate, Supreme Court, said India enjoys democratic set-up. The Centre’s meddling with the state list will damage the Indian federal system.

“Any Bill passed by Parliament should respect constitutional authorities. Article 257 of the Constitution empowers the union government to extend powers to states to discharge the proper functioning, but that does not mean the states should be deprived of discharging during under the state list,” he said.

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Pradeep Kumar Jain, managing partner at Singhania & Co., said it is not happening for the first time. “Before 1989, the same situation existed whe today’s opposition had a brute majority at the Centre and in states which resulted in the frequent changes in the Constitution.”

He said neither Parliament nor states can do anything ultra vires to the Constitution. “If one has majority to amend the Constitution, it cannot be termed unconstitutional unless it is against the basic structure of the Constitution,” Jain said.

Sumit Batra, partner at India Law Alliance, said when the Centre tries to encroach upon the subjects which are under prerogative of the state, or where the centre tries to evade from any responsibility guaranteed to a state by way of a constitutional provision/obligation, the same poses a threat to federalism.

“For a nation to grow, it is important that the central and the state government move together rather than having conflicts. The encroachment of subjects enshrined in the state list of Schedule VII by the centre may result in collapse of the overall federal structure,” he opined.

Bones of contention

i) The Centre’s olive branch to borrow on behalf of states Rs 1.1 trillion to onlend to them for compensation softens the states’ opposition. They now want the Centre to also borrow Rs 1.06 trillion

ii) However, union power ministry’s move to invoke a tripartite agreement to get Rs 1.417.50 power dues from Jharkhand prompts the state to reject the Centre’s offer on GST compensation

iii) Farm Bills: Opposition-ruled states believe Centre has encroached their turf, using its powers in the Constitution to regulate inter-state and intra-state trade in specified commodities under Entry 42 of the Union List and Entry 33 of the Concurrent List to bring these laws.

iv) States such as Chhattisgarh, Jharkhand say proposed amendment to the Coal Bearing Areas to allow land acquisition to take away their authorities on land and revenues coming from it

v) Bihar, Rajasthan, west Bengal, Odisha and Kerala oppose proposed amendments to Electricity Act to enable turnaround of discoms.

With inputs from Indivjal Dhasmana

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