As states become assertive, is a redraw of centre-states power on anvil?

In rapid succession at least three states have chosen to confront the centre in recent weeks. Is this a sign of a new assertiveness among the states against a powerful centre, which enjoyed a clearly superior status as per the Indian Constitution? Is a redraw of the centre-states power on the anvil?

Andhra Pradesh chief minister Chandrababu Naidu has drawn the most attention among the three. Last week, he not only withdrew consent to Central Bureau of Investigation (CBI) to investigate cases in the state, his government is accused of “leaking” information gleaned from CBI to the state Anti-Corruption Bureau on a case involving a central government employee posted in the state. West Bengal chief minister Mamata Banerjee has also quickly copied him, withdrawing the general consent to allow the CBI to prosecute cases in the state. CBI, set up under the Delhi Special Police Establishment Act of 1946 operates under such a consent system with all state governments to track cases against government employees, within the geographical limits of the state. 

Almost as significant is the plan of Delhi chief minister Arvind Kejriwal to overturn the new pension scheme (NPS) for the state government employees and revert to the old defined benefit scheme. Kejriwal has apparently also written to several non BJP ruled state governments to copy his plans for their government employees. The NPS came into effect from January 1, 2014 and each state has migrated their employees who joined thereafter to it, instead of the earlier pay as you go system. The employees and the states finance their pension corpus as matching contributions.

“The relations have definitely worsened”, said Sanjay Kumar, director at the Delhi based Centre for the Study of Developing Societies. “In a democratic polity it is unfair to expect the states and the centre to be always speaking the same language. But there is no doubt there are more concerns about what is happening now than in the past”. 

"Clearly there is a pattern here”, said a former secretary in the government of India. He said the changes reflect the insecurity among many states at what they perceive as increasing role of the centre in their sovereign sphere. Whether it is the role of CBI or the new pension scheme (NPS) or even the goods and services tax (GST), all of them have involved the states having to cede some of their role and clearly those have begun to rankle them. Interestingly, the CBI was set up in the 1940s, the NPS in 2004 and the GST in 2017. All of them seem to rankle the states now.

Of course this is not the first time Naidu has revolted against some of centre’s decisions. He had taken a tough stand against the award of the 11th Finance Commission, forcing it to redo some of its math. But it is different this time, according to an officer. “Those were on economic issues, it is a political challenge now.” By emphasising the primacy of the state government-run Anti-Corruption Bureau at the cost of CBI, he is altering the balance of power in the bureaucracy too. They may soon have to choose between loyalty to the state versus that to the centre.

According to Dr Pinaki Chakraborty, Professor, NIPFP, the root of the differences can be traced to the roll out of GST regime in the country since 2017. “The states have lost their independence in tax issues. So where would they assert their independence except in how they spend their money, or their expenditure budget”, he says. The state governments increasingly feel stymied in their ability to respond to their voters’ need, he says, and that is driving their strident note against the centre. 

For instance, Kejriwal’s plans to cut way from the new pension scheme (NPS) is one of those. As a Finance Commission source said, the move will free the state from having to contribute to the pension corpus of all its employees. “In the short term it is a freedom but of course the implication is dangerous for the long term”, the source said. So far the Commission has not heard any such demands from the states to move out of the NPS, but they could always make the demand in their written submissions, the source said. Relations between the Commission and the southern states including Naidu’s Andhra Pradesh have been tense since the centre included some controversial terms of reference for the Commission. It was asked to examine the “populist” schemes run by states. The Commission is set up, as per the Constitution, every five years to decide on how tax proceeds - direct and indirect - will be divided between the centre and states and among the states. As the states need to borrow more from the market and depend less on the centre, they see less reason to accede to plans made by the centre, said the Commission source.

Chakraborty, who was economic advisor to the 14th Finance Commission, says while the disquiet among the states is now restricted to a few, “it could spread to more states irrespective pf party affiliations”. Anil Swarup, who as coal secretary worked out the details of revenue share between the states from the auctions of coal mines, says “states and centre should work together for the interest of the country”.

There are incipient signs from other states too. Telangana, for instance, has recently signed an MoU with Estonia for expanding the scope of e-governance in the state. Estonia has built a formidable global reputation in the sector. However, the interesting aspect of the signing is that it has not been curated by the centre. “Only if necessary we shall approach the centre, later”, said one of the officers who worked on the handshake on behalf of Telangana.