Southern States Demand Fair Devolution & Delimitation in Zonal Council Meet

20 Aug Southern States Demand Fair Devolution & Delimitation in Zonal Council Meet

✎ The 15th Finance Commission’s horizontal devolution formula reduced Karnataka’s share from 4.7% to 3.6%, leading to an estimated loss of ₹65,000 crore, reflecting ongoing debates on equitable fiscal and political representation.

Subject Relevance — Where This Topic Fits

• GS Paper II — Functions and Responsibilities of the Union and the States, Issues and Challenges Pertaining to the Federal Structure, Devolution of Powers and Finances up to Local Levels and Challenges Therein  |  GS Paper III — Indian Economy and Issues Relating to Planning, Mobilisation of Resources, Growth, Development and Employment, Government Budgeting
• Prelims: Finance Commission, Terms of Reference of Finance Commissions, Devolution of Taxes, Divisible Pool of Taxes, 15th Finance Commission, 16th Finance Commission, Delimitation Commission, Census of India 1971, Article 82 of the Constitution, Article 170 of the Constitution, Southern Zonal Council, Terms of Reference of Zonal Councils
• Essay: Federalism in India: Balancing Unity and Diversity, Equitable Development and Regional Disparities in India

Quick Revision: The 15th Finance Commission’s horizontal devolution formula reduced Karnataka’s share from 4.7% to 3.6%, leading to an estimated loss of ₹65,000 crore, reflecting ongoing debates on equitable fiscal and political representation.

Why is this in the news?

The Chief Minister of Karnataka, D.K. Shivakumar, raised concerns at the 31st Southern Zonal Council meeting regarding the perceived inequity in fiscal devolution and political representation for Southern states. He highlighted Karnataka’s significant economic contributions while noting a decline in its share of the divisible pool of taxes under the 15th Finance Commission and sought restoration of its share to 4.7%. Additionally, he advocated for the adoption of the 1971 Census as the basis for future delimitation to ensure fair political representation, alongside the retention of the existing Lok Sabha seat strength of 543 for the next 25 years.

Background

• The Southern Zonal Council, established under the States Reorganisation Act, 1956, serves as a platform for cooperative federalism, enabling discussion of inter-state issues among Southern states: Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, and Telangana.
• The Finance Commission, a constitutional body under Article 280, is tasked with recommending the distribution of the divisible pool of taxes between the Union and the states, as well as among states, based on specified criteria.
• The 15th Finance Commission (2020–2025) recommended a horizontal devolution formula of 41% of the divisible pool to states, with Karnataka’s share declining from 4.7% to 3.6%, resulting in an estimated loss of ₹65,000 crore over six years.
• Delimitation, the process of redrawing electoral boundaries, is governed by the Delimitation Act, 2002, and is typically based on the latest Census data, though the 1971 Census has been a point of contention for future delimitation exercises.
• The principle of ‘one person, one vote’ underpins democratic representation, but debates persist on whether population-based representation adequately accounts for demographic shifts or economic contributions.

Key Concepts: Fiscal Devolution, Delimitation, and the Role of the Census

• **Fiscal Devolution**: The process by which the Union government shares tax revenues with states, governed by the Finance Commission’s recommendations. The divisible pool includes taxes such as income tax, corporation tax, and central excise duties, excluding cess and surcharges.
• **Horizontal Devolution**: The distribution of the divisible pool among states based on criteria such as population, income distance, area, forest cover, and demographic performance. The 15th Finance Commission introduced a ‘demographic performance’ criterion to reward states with better population control.
• **Vertical Devolution**: The share of the divisible pool allocated to states as a whole, historically around 42% under the 14th Finance Commission, reduced to 41% under the 15th Finance Commission.
• **Delimitation**: The process of redrawing the boundaries of parliamentary and assembly constituencies to reflect population changes, conducted by the Delimitation Commission.
• **Census of India**: A decennial exercise conducted by the Office of the Registrar General and Census Commissioner under the Ministry of Home Affairs.
• **Article 82 and Article 170**: Article 82 empowers Parliament to enact a Delimitation Act after each Census, while Article 170 mandates the readjustment of assembly constituencies based on the Census. These provisions underscore the constitutional basis for delimitation.
• **Southern States’ Economic Contribution**: Southern states, despite housing ~20% of India’s population, contribute ~33% to the national GDP, with Karnataka alone accounting for ~9% of GDP and ~42% of software exports, highlighting the need for equitable fiscal and political representation.
• **Women’s Reservation**: The Chief Minister’s proposal to accommodate women’s reservation within existing seats aligns with the principle of not altering the total number of seats in the short term.

Key Features

Why it Matters

Fiscal Federalism

• The demand for increased devolution of funds highlights ongoing debates regarding the equitable distribution of financial resources between the Union and state governments, a cornerstone of India’s federal structure.
• Proposals to assign greater weight to economic performance in devolution criteria reflect a desire for fiscal incentives for states contributing significantly to national economic output.
• The non-release of recommended grants by the Finance Commission underscores potential challenges in the implementation of fiscal federalism recommendations.

Political Representation and Equity

• The call to retain the 1971 census as the basis for delimitation and to freeze Lok Sabha seats addresses concerns that future delimitation based on recent population data could reduce the political representation of states with lower population growth.
• The issue of delimitation directly impacts the balance of power in the national legislature, influencing the voice of different regions in policy-making.
• Accommodating women’s reservation within existing Lok Sabha seats, as proposed, seeks to enhance gender representation without altering the current regional balance of seats.

Regional Economic Disparities

• The emphasis on Southern states’ disproportionately high contribution to national GDP and software exports highlights regional economic strengths and their role as economic engines.
• Demands for ‘fairness in funds, voice and respect’ reflect a perception among economically prosperous states that their contributions are not adequately recognised in the current devolution and representation frameworks.
• The discussion on FDI inflows and Global Capability Centres underscores the role of specific states in attracting foreign investment and fostering technological growth.

Challenges

1. Balancing Equity and Efficiency in Fiscal Devolution

• Achieving a balance between providing adequate resources to states based on their needs and incentivising economic performance remains a complex challenge for Finance Commissions.
• The criteria for horizontal devolution (among states) often lead to disagreements, as different states prioritise different factors like population, area, forest cover, and fiscal discipline.

UPSC Link: GS-II: Functions and Responsibilities of the Union and the States

2. Maintaining Political Representation in Delimitation

• The constitutional mandate for delimitation based on the latest census data conflicts with concerns of states that have effectively controlled population growth, potentially leading to a reduction in their parliamentary seats.
• Freezing the number of Lok Sabha seats for an extended period, while addressing regional concerns, may lead to a disproportionate increase in constituency sizes, impacting the efficacy of representation.

UPSC Link: GS-II: Parliament and State Legislatures – Structure, Functioning, Conduct of Business

3. Inter-State Disparities and Federal Harmony

• Perceived inequities in resource allocation and political representation can strain inter-state relations and the overall fabric of cooperative federalism.
• Addressing the concerns of economically advanced states regarding their contributions versus receipts is crucial for maintaining national unity and fostering a sense of shared progress.

UPSC Link: GS-II: Issues and Challenges Pertaining to the Federal Structure

4. Implementation of Finance Commission Recommendations

• The non-release of recommended special and state-specific grants by the Union government raises questions about the binding nature and timely implementation of Finance Commission recommendations.
• Delays or non-implementation can undermine the credibility of the Finance Commission’s role and impact states’ financial planning.

UPSC Link: GS-II: Finance Commission – Powers, Functions and Responsibilities

Challenges — UPSC Perspective

Way Forward

• Convene a high-level inter-state council meeting to discuss and build consensus on the criteria for financial devolution, considering both population and economic performance.
• Establish a transparent mechanism for the timely release of all grants recommended by the Finance Commission, ensuring accountability and adherence to fiscal federal principles.
• Initiate a comprehensive dialogue on the future of delimitation, exploring constitutional amendments or alternative frameworks that balance equitable representation with incentives for population control.
• Explore innovative fiscal instruments and incentives to reward states for their economic contributions and efficient resource management, beyond traditional devolution formulas.
• Strengthen the role of Zonal Councils as platforms for constructive dialogue and resolution of inter-state issues, fostering cooperative federalism.
• Conduct an independent review of the impact of various Finance Commission recommendations on state finances to identify areas for improvement and ensure fairness.
• Develop a national consensus on the principles of fiscal federalism that acknowledges regional diversity while promoting national unity and equitable development.

UPSC Value Addition

Prelims Practice Questions

Q1. Consider the following statements regarding the Finance Commission of India: 1. It is a constitutional body appointed every five years under Article 280. 2. The 15th Finance Commission recommended a horizontal devolution formula based on population, income distance, and demographic performance. 3. The 16th Finance Commission is currently functional and has recommended a 4.131% share for Karnataka. 4. The Finance Commission’s recommendations are binding on the Union government. How many of the above statements are correct?

1. Only one
2. Only two
3. Only three
4. All four

Answer: Only three — Statements 1, 2, and 3 are correct. Statement 4 is incorrect as the Finance Commission’s recommendations are advisory and not binding on the Union government.

Q2. Assertion (A): The Southern Zonal Council is a statutory body established under the States Reorganisation Act, 1956. Reason (R): It serves as a platform for cooperative federalism and coordination between the Union and State governments in the southern region.

1. Both A and R are true, and R is the correct explanation of A.
2. Both A and R are true, but R is NOT the correct explanation of A.
3. A is true, but R is false.
4. A is false, but R is true.

Answer: Both A and R are true, but R is NOT the correct explanation of A. — The Southern Zonal Council is indeed a statutory body under the States Reorganisation Act, 1956, and it functions as a platform for cooperative federalism among southern states and the Union government.

Q3. Which of the following criteria are considered by the Finance Commission for horizontal devolution of taxes among states?

1. Population, income distance, and forest cover
2. Population, income distance, and demographic performance
3. Population, area, and literacy rate
4. Income distance, tax effort, and fiscal capacity

Answer: Population, income distance, and demographic performance — The Finance Commission uses population, income distance, and demographic performance as key criteria for horizontal devolution of taxes among states.

Mains Practice Question

✍ Analyse the constitutional and institutional mechanisms governing fiscal federalism in India, with particular reference to the demands raised by Southern States for ‘fairness in devolution and delimitation’. Critically examine the role of the Finance Commission, Zonal Councils, and the delimitation process in addressing regional imbalances. (15 Marks)

Approach: MODEL-ANSWER SKELETON:

1. **Introduction**: Define fiscal federalism and its significance in India’s constitutional framework (Art. 268-293).

2. **Finance Commission’s Role**:
– Constitutional mandate (Art. 280) and composition.
– Vertical vs. horizontal devolution (Tax devolution vs. grants-in-aid).
– Criteria for horizontal devolution: Population (1971 census), income distance, demographic performance (15th FC).
– Recent recommendations: 16th FC’s 4.131% share for Karnataka and demands for restoration to 4.7%.
– Critique: Over-reliance on demographic criteria and neglect of economic performance.

3. **Zonal Councils**:
– Statutory bodies (States Reorganisation Act, 1956) for cooperative federalism.
– Role in addressing regional disparities and facilitating dialogue (e.g., Southern Zonal Council).
– Limitations: Advisory nature and lack of binding authority.

4. **Delimitation Process**:
– Constitutional provisions (Art. 82, 170) and role of the Delimitation Commission.
– Demand for using 1971 census data to prevent erosion of southern states’ representation.
– Women’s Reservation Act, 2023: Implications for existing seat strength and delimitation.
– Critique: Potential over-representation of populous states and under-representation of high-income states.

5. **Regional Imbalances**:
– Data on southern states’ contribution to GDP (33% with 20% population) and Karnataka’s role in software exports and FDI.
– Loss of ₹65,000 crore to Karnataka due to reduced share in the divisible pool (15th FC).

6. **Conclusion**:
– Need for a balanced approach combining economic performance, demographic data, and equity.
– Strengthening institutional mechanisms (Finance Commission, Zonal Councils) to address grievances.
– Emphasise cooperative federalism and data-driven policy-making.

Source: The Hindu

Generated by AanyaAi for educational purpose.

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