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Thursday, June 19, 2008

Sarkaria Commission Recommendations

Given below is the list of recommendations made by the Sarkaria Commission retrieved from here



With a view to reviewing the working of the existing arrangements between the Union and the States in the changed socio-economic scenario, the Government constituted a Commission vide Ministry of Home Affairs Notification No.IV/11017/1/83-CSR dated June 9, 1983 under the Chairmanship of Justice R.S.Sarkaria with Shri B.Sivaraman and Dr.S.R.Sen as its members. The terms of reference of the Commission as enunciated in this notification were as under :-

“The Commission will examine and review the working of the existing arrangements between the Union and States in regard to powers, functions and responsibilities in all spheres and recommend such changes or other measures as may be appropriate”.

"In examining and reviewing the working of the existing arrangements between the Union and the States and making recommendations as to the changes and measures needed, the commission will keep in view the social and economic developments that have taken place over the years and have due regard to the scheme and framework of the Constitution which the founding fathers have so sedulously designed to protect the independence and ensure the unity and integrity of the country which is of paramount importance for promoting the welfare of the people."

The Commission after conducting several studies, eliciting information, holding discussions and after detailed deliberations submitted its report in January, 1988. The report contains 247 recommendations spreading over 19 Chapters.


The summary of Sarkaria Commission's recommendations is as follows:-



S.No. Para No. Recommendation in the Report


1.   2.43.01      Residuary powers of legislation in regard to taxation matters should continue to remain exclusively in the competence of Parliament, while the residuary field other than that of taxation, should be placed in the Concurrent List. The Constitution may be suitably amended to give effect to this recommendation (Para 2.6.18)

2.   2.43.02      (i) The enforcement of Union laws particularly those relating to the Concurrent sphere, is secured through the machinery of the States. Coordination of policy and action in all areas of concurrent or overlapping jurisdiction through a process of mutual consultation and cooperation is, therefore, a pre-requisite of smooth and harmonious working of the dual system. To secure uniformity on the basic issues of national policy with respect to the subject of a proposed legislation, consultation may be carried out with the State Governments individually, and collectively at the forum of the proposed Inter-Governmental Council. (para 2.14.01)

                        (ii) It is not necessary to make the proposed consultation a constitutional obligation. This will make the process needlessly rigid. The advantage of a convention or rule of practice is that it preserves the flexibility of the system and enables it to met the challenge of an extreme urgency or on unforeseen contingency. This convention as to consultation with the State Governments, individually, as well as collectively, should be strictly adhered to except in rare and exceptional cases of extreme urgency or emergency. (Para 2.14.03)

3.   2.43.03      The best way of working Union-State relations in the sphere of education would be that the norms and standards of performance are determined by the Union and professional bodies such as the UGC set up under Central Enactments but the actual implementation is left to the States. By the same token a system of monitoring would have to be established by the Union. The basis pre-requisites of successful working of such professional bodies are -

                        (i) that their composition, functioning and mode of operation should be so professional and objective that their opinion, advice or directive commands implicit confidence and

                        (ii) this objective cannot be achieved without close concert, collaboration and cooperation between the Union and the States (paras 2.17.16 and 2.17.17)

4.   2.43.04      There is a potential for misuse by the two levels of government of the powers available by virtue of Entry 45 of List III. However, the mere fact that this power is capable of being misused, is no ground for amending the constitution. There is a case for providing appropriate safeguards against the misuse of this power, in the commissions of Inquiry Act, itself. such safeguards can be :-

                        (i) that no Commission of inquiry against an incumbent or former Minister of a State Government on charges of abuse of power or misconduct shall be appointed by the Union Government unless both Houses of Parliament, by resolution passed by the majority of members present and voting require the Union Government to appoint such a Commission or, the Minister or Ministers concerned request in writing for the appointment of such a Commission; and

                        (ii) No Commission of inquiry shall be appointed to inquire into the conduct of a Minister (incumbent or former) of a State Government with respect to a matter of public importance touching his conduct while in office, unless the proposal is first placed before the Inter-Governmental Council (recommended to be established under Article 263) and has been cleared by it.

                        (iii) Appropriate safeguard on the lines indicated above, be provided in the Commissions of Inquiry Act, 1952, itself, against the possible misuse of this power, while appointing a commission to inquire into the conduct of a Minister or ministers of a State Government. (Paras 2.22.25 to 2.22.27)

5.   2.43.05      Ordinarily, the Union should occupy only that much field of a Concurrent subject on which uniformity of policy and action is essential in the larger interest of the nation, leaving the rest and details for State action within the broad frame-work of the policy laid down in the Union Law. Further, whenever, the Union proposes to undertake legislation with respect to a matter in the Concurrent List, there should be prior consultation not only with the State Governments, individually, but also, collectively, with the Inter-Governmental Council which as we have recommended, should be established under Article 263. A resume of the views of the State Governments and the comments of the Inter-Governmental Council should accompany the Bill when it is introduced in parliament (para 2.23.05)

6.   2.43.06      (i) Clause (2) of Article 252 may be substituted by a new clause providing that an Act passed by Parliament under clause (1), may be amended or replaced either by Parliament in the manner provided in clause (1) or also by the Legislature of the State to which it applies, provided no such amending or repealing legislation of the State Legislature shall take effect unless, having been reserved for the consideration of the President, it has received his assent.

                        (ii) Any law passed by Parliament with respect to a matter in List II under clause (1) of Article 252, should not be of perpetual duration but should remain in force for a specific term, not exceeding three years. The Act itself should contain provisions requiring its periodic review before the expiry of the term. If, after such review, it is considered necessary to re-enact the law in its original or modified form, it may be done for a period not exceeding the original term, by following the same procedure as specified in clause (1) of the Article. (Para 2.27.04)

7.   2.43.07      When a Resolution passed by the Legislative Assembly of a State for abolition or creation of a legislative Council in the State is received, the President shall cause the Resolution to be placed, within a reasonable time, before Parliament together with the comments of the Union Government. Parliament may thereupon accept or reject the request contained in the Resolution. If the Resolution is so adopted by Parliament, the Union Government shall introduce the necessary legislation in Parliament for implementation of the same. If necessary, Article 169 may be amended to provide for this procedure.  (Para 2.33.06).

8.   2.43.08      In order to remedy the unfortunate situation in which the local bodies find themselves, a comprehensive law (under clause (1) of Article 285 read with the saving clause in Entry 32 of List I), analogous to section 135 of the Railway Act, 1890, and section 3 and 4 of the Railways (Local Authorities Taxation) Act ; 1941 be passed making liable the properties and administrations of all undertakings like Railways, Posts and Telegraphs, Telephones, etc., of the Union at such fair and reasonable rates as may be notified from time to time by the Union Government after taking into consideration the recommendations of a person, who is or has been a judge of a High Court or a District judge. (para 2.35.13)

9.   2.43.09      Cases may arise, particularly in the modern context where States may feel aggrieved on account of taxes imposed by the Union on the trade or business in terms of clause (2) of Article 289. The scheme of the Constitution envisages remedial action under clause (3). Where one or more State Governments feel aggrieved on account of any action of the Union Government covered by clause (2) of Article 289, adequate consultation should be held with the State Governments or the National Economic and Development Council proposed by us and action taken to afford relief in terms of clause (3) of Article 289. (Para 2.36.11)

10.   2.43.10    Before a law is passed by Parliament by virtue of clause (3) of article 286 read with Entries 92A and 92B of List I, the State Governments and the National Economic and Development Council should be consulted and the resume of their comments should be placed before Parliament along with the Bill. (Para 2.37.09)


11.   3.9.01      Articles 256, 257 and 365 are wholesome provisions, designed to secure coordination between the Union and the States for effective implementation of Union laws and the national policies indicated therein. Nonetheless, a direction under Articles 256 and 257 and the application of the sanction under Article 365 in the event of its non-compliance, is a measure of last resort. Before issue of directions to a State or application of sanction under Article 365, utmost caution should be exercised and all possibilities explored for settling points of conflict by all other available means. (Para 3.5.25 and 3.5.27).

12.   3.9.02      Federalism is more a functional arrangement for cooperative action, than a static institutional concept. Article 258 provides a tool, by the liberal use of which, cooperative federalism can be substantially realised in the working of the system. A more extensive and generous use of this tool should be made, than has hither-to been done, for progressive decentralisation of powers to the Governments of the States and/or their officers and authorities. (para 3.7.10).


13.   4.16.01    A person to be appointed as a Governor should satisfy the following criteria :

                        (i) He should be eminent in some walk of life.

                        (ii) He should be a person outside the State.

                        (iii) He should be a detached figure and not too intimately connected with the local politics of the State; and

                        (iv) He should be a person who has not taken too great a part in politics generally, and particularly in the recent past.

                        In selecting a Governor in accordance with the above criteria, persons, belonging to the minority groups should continue to be given a chance as hitherto. (para 4.6.09)

14.   4.16.02    It is desirable that a politician from the ruling party at the Union is not appointed as Governor of a State which is being run by some other party or a combination of other parties. (para 4.6.19).

15.   4.16.03    In order to ensure effective consultation with the State Chief Minister in the selection of a person to be appointed as Governor, the procedure of consultation should be prescribed in the Constitution itself by suitably amending Article 155. (para 4.6.25).

16.   4.16.04    The Vice-President of India and the Speaker of the Lok Sabha may be consulted by the Prime Minister in selecting a Governor. The consultation should be confidential and informal and should not be a matter of constitutional obligation. (para 4.6.33)

17.   4.16.05    The Governor's tenure of office of five years in a State should not be disturbed except very rarely and that too, for some extremely compelling reasons (para 4.7.08).

18.   4.16.06    Save where the President is satisfied that, in the interest of the security of the State, it is not expedient to do so, the Governor whose tenure is proposed to be terminated before the expiry of the normal term of five years, should be informally apprised of the grounds of the proposed action and afforded a reasonable opportunity for showing cause against it. It is desirable that the President (in effect, the Union Council of Ministers) should get the explanation, if any, submitted by the Governor against his proposed removal from office, examined by an Advisory Group consisting of the Vice-President of India and the Speaker of the Lok Sabha or a retired Chief Justice of India. After receiving the recommendation of this Group, the President may pass such orders in the case as he may deem fit. (para 4.8.08).

19.   4.16.07    When before expiry of the normal term of five years, a Governor resigns or is appointed Governor in another State, or has his tenure terminated, the Union Government may lay a statement before both Houses of Parliament explaining the circumstances leading to the ending of the tenure. Where a Governor has been given an opportunity to show cause against the premature termination of his tenure, the statement may also include the explanation given by him, in reply (para 4.8.09).

20.   4.16.08    As a matter of convention, the Governor should not, on demitting his office, be eligible for any other appointment or office of profit under the Union or a State Government except for a second term as Governor or election as Vice-President or President of India. Such a convention should also require that, after quitting or laying down his office, the Governor shall not return to active partisan politics.(para 4.9.04)

21.   4.16.09    A Governor should, at the end of his tenure, irrespective of its duration, be provided reasonable post-retirement benefits for himself and for his surviving spouse. (para 4.10.02).

22.   4.16.10    (a) In choosing a Chief Minister, the Governor should be guided by the following principles, viz. :

                        (i) The party or combination of parties which commends the widest support in the Legislative Assembly should be called upon to form the Government.

                        (ii) The Governor's task is to see that a Government is formed and not to try to form a Government which will pursue policies which he approves.

                        (b) If there is a single party having an absolute majority in the Assembly, the leader of the party should automatically be asked to become the Chief Minister.

                        If there is no such party, the Governor should select a Chief Minister from among the following parties or group of parties by sounding them, in turn, in the order of preference indicated below:

                        (i) An alliance of parties that was formed prior to the Elections.

                        (ii) The largest single party staking a claim to form the Government with the support of others, including 'independents.

                        (iii) A post-electoral coalition of parties, with all the partners in the coalition joining government.

                        (iv) A post-electoral alliance of parties, with some of the parties in the alliance forming a Government and the remaining parties, including 'independents supporting the Government from outside.

                        The Governor while going through the process described above should select a leader who in his (Governor's) judgement is most likely to command a majority in the Assembly.

                        (c) A Chief Minister, unless he is the leader of a party which has absolute majority in the Assembly, should seek a vote of confidence in the Assembly within 30 days of taking over. This practice should be religiously adhered to with the sanctity of a rule of law. (Paras 4.11.03 to 4.11.06).

23.   4.16.11    The Governor should not risk determining the issue of majority support, on his own, outside the Assembly. The prudent course for him would be to cause the rival claims to be tested on the floor of the House. (para 4.11.07).

24.   4.16.12    The Governor cannot dismiss his Council of Ministers so long as they continue to command a majority in the Legislative Assembly. Conversely, he is bound to dismiss them if they lose the majority but do not resign. (para 4.11.09)

25.   4.16.13    (a) when the Legislative Assembly is in session, the question of majority should be tested on the floor of the House.

                        (b) If during the period when the Assembly remains prorogued, the Governor receives reliable evidence that the Council of Ministers has lost 'majority' he should not, as a matter of constitutional propriety, dismiss the council unless the Assembly has expressed on the floor of the House its want of confidence in it. He should advise the Chief Minister to summon the Assembly as early as possible so that the 'majority' may be tested.

                        (c) Generally, it will be reasonable to allow the Chief Minister a period of 30 days for the summoning of the Assembly unless there is very urgent business to be transacted like passing the Budget, in which case, a shorter period may be allowed. In special circumstances, the period may go up to 60 days. (paras 4.11.10, 4.11.11 and 4.11.13).

26.   4.16.14   So long as the Council of Ministers enjoys the confidence of the Legislative Assembly, the advice of the Council of Ministers in regard to summoning and proroguing a House of the Legislature and in dissolving the Legislative Assembly, if such advice is not patently unconstitutional, should be deemed as binding on the Governor. (para 4.11.17).

27.   4.16.15 (a) The Governor may in the exigencies of certain situations, exercise his discretion to summon the Assembly only in order to ensure that the system of responsible Government in the State works in accordance with the norms envisaged in the Constitution.

      (b) Then the Chief Minister designedly fails to advise the summoning of the Assembly within six months of its last sitting, or advises its summoning for a date falling beyond this period, the Governor can summon the Assembly within the period of six months specified in article 174 (1).

     (c)  When a Chief Minister (who is not the leader of the party which has absolute majority in the Assembly), is not prepared to summon the Legislative Assembly within 30 days of the taking over (vide recommendation 4.16.10(c) above) or within 30 days or 60 days, as the case may be, when the Governor finds that the Chief Minister no longer enjoys the confidence of the Assembly (vide recommendation 4.16.13(c) above), the Governor would be within his constitutional right to summon the Assembly for holding the "Floor Test". (paras 4.11.19 and 4.11.20).

28.   4.16.16    If a notice of a no-confidence motion against a Ministry is pending in a House of the Legislature and the motion represents a legitimate challenge from the Opposition, but the Chief Minister advises that the House should be prorogued, the Governor should not straightaway accept the advice. He should advise the Chief Minister to postpone the prorogation and face the motion. (para 4.11.22)

29.   4.16.17 (a) When the advice for dissolving the Assembly is made by a Ministry which has lost or is likely to have lost majority support, the Governor should adopt the course of action as recommended in paras 4.16.12, 4.16.13 and 4.16.15(c) above.

       (b) If ultimately a viable Ministry fails to emerge, the Governor should first consider dissolving the Assembly and arranging for fresh elections after consulting the leaders of the political parties concerned and the Chief Election Commissioner.

       (c) If the Assembly is to be dissolved and an election can be held early, the Governor should normally ask the outgoing Ministry to continue as a caretaker Government. However, this step would not be proper if the outgoing Ministry has been responsible for serious mal-administration or corruption.

      (d) A convention should be adopted that a caretaker Government should not take any major policy decisions.

      (e) If the outgoing Ministry cannot be installed as a caretaker Government for the reason indicated in (c) above or if the outgoing Ministry is not prepared to function as a caretaker Government, the Governor, without dissolving the Assembly, should recommend President's rule in the state.

       (f) If fresh election cannot be held immediately on account of a national calamity or State-wide disturbances, it should not be proper for the Governor to install a caretaker Government for the long period that must elapse before the next election is held. He should recommend proclamation of President's rule under Article 356 without dissolving the Assembly.

       (g) If it is too early to hold fresh election, the Assembly not having run even half its normal duration of five years, the Governor should recommend President's rule under Article 356 without dissolving the Assembly. (paras 4.11.25 to 4.11.30).

30.   4.16.18    The Governor has no discretionary power in the matter of nominations to the Legislative Council or to the Legislative Assembly. If at the time of making a nomination, a Ministry has either not been formed or has resigned or lost majority in the Assembly, the Governor should await the formation of a new Ministry. (Para 4.11.31).

31.   4.16.19    Where a State University Act provides that the Governor, by virtue of his office, shall be the Chancellor of the University and confers powers and duties on him not as Governor of the State but as Chancellor, there is no obligation on the Governor, in this capacity as Chancellor, always to act on Ministerial advice under Article 163 (1). However, there is an obvious advantage in the Governor consulting the Chief Minister or other Ministers concerned, but he would have to form his own individual judgement. In his capacity as Chancellor of a University, the Governor may be required by the University's statute to consult a Minister mentioned in the statute on specified matters. In such cases, the Governor may be well advised to consult the Minister on other important matters also. In either case, there is no legal obligation for him to necessarily act on any advice received by him. (paras 4.11.37 to 4.11.39)

32.   4.16.20    The Governor, while sending ad hoc or fortnightly reports to the President, should normally take his chief Minister into confidence, unless there are over-riding reasons to the contrary. (Para 4.12.06).

33.   4.16.21    The discretionary power of the Governor as provided in Article 163 should be left untouched. (para 4.13.03).

34.   4.16.22    When a Governor finds that it will be constitutionally improper for him to accept the advice of his Council of Ministers, he should make every effort to persuade his Ministers to adopt the correct course. He should exercise his discretionary power only in the last resort. (para 4.13.04).

35.   4.16.23    Certain specific functions have been conferred (or are conferrable) on the Governors of Maharashtra and Gujarat (Article 371(2), Nagaland [First Proviso to Article 371A(1)(b), Article 371A (1)(d) and Article 371A(2)(b) and (f)], Manipur (Article 371C(1), Sikkim [Article 371 F(g)] and Arunachal Pradesh [First Proviso to Article 371H(a)] to be exercised by them in their discretion. In the discharge of these functions, the Governor concerned is not bound to seek or accept the advice of his council of Ministers. However, before taking a final decision in the exercise of his discretion, it is advisable that the Governor should, if feasible, consult his Ministers even in such matters, which relates essentially to the administration of a State. (para 4.14.05).

36.   4.16.24    It would be neither feasible nor desirable to formulate a comprehensive set of guidelines for the exercise of the discretionary powers of the Governor. A Governor should be free to deal with a situation according to his best judgement, keeping in view the Constitution and the law and the conventions of the Parliamentary system outlined in this chapter as well as in Chapter V "Reservation of Bills by Governors for President's consideration" and Chapter VI "Emergency Provisions". (para 4.15.06).


37.   5.19.01    Normally in the discharge of the functions under Article 200, the Governor must abide by the advice of his council of Ministers. Article 200 does not invest the Governor, expressly or by necessary implication, with a general discretion in the performance of his functions thereunder, including reservation of Bill for the consideration of the President. However, in rare and exceptional cases, he may act in the exercise of his discretion, where he is of opinion that the provisions of the Bill are patently un-constitutional, such as where the subject-matter of the Bill is ex-facie beyond the legislative competence of the State Legislature, or where its provisions manifestly derogate from the scheme and framework of the Constitution so as to endanger the sovereignty, unity and integrity of the nation, or clearly violate Fundamental Rights or transgress other constitutional limitations and provisions. (Paras 5.6.06 and 5.6.13(i))

38.   5.19.02    In dealing with a State Bill presented to him under Article 200, the Governor should not act contrary to the advice of his Council of Ministers merely because, personally, he does not like the policy embodied in the Bill.(Paras 5.6.09 and 5.6.13(ii))

39.   5.19.03    Needless reservation of Bills for President's consideration should be avoided. Bill should be reserved only if required for specific purposes, such as :

a) to secure immunity from the operation or Articles 14 and 19 vide the First Proviso to Article 31A(1) and the proviso to Article 31C.

b) to save a Bill on a concurrent List subject from being invalidated on the ground of repugnancy to the provisions of law made by Parliament or an existing law vide Article 254(2);

c) to ensure validity and effect for a State Legislation imposing tax on water or electricity stored, generated, consumed, distributed or sold by an authority established under a Union law vide Article 288 (2)

d) a bill imposing restrictions on trade or commerce, in respect of which previous sanction of the President had not been obtained, vide Article 304 (b) read with Article 255. (para 5.14.05).

40.   5.19.04    Normally, when a Bill passed by the State Legislature is presented to the Governor with the advice of the Council of Ministers that it be reserved for the consideration of the President, then the Governor should do so forthwith. If, in exceptional circumstances, as indicated in para 5.19.01 above, the Governor thinks it necessary to act and adopt, in the exercise of his discretion, any other course open to him under Article 200, he should do so within a period not exceeding one month from the date on which the Bill is presented to him. (Para 5.16.04)

41.   5.19.05    a) Every reference of a State Bill from the State should be self-contained, setting out precisely the material facts, points for consideration and the ground on which the reference has been made. The relevant provisions of the Constitution should also be indicated.

b) If the reference is made under Article 254 (2), the provisions of the Bill which are considered repugnant to or inconsistent with the specific provisions of a Union Law or an existing Law, should be clearly identified.(Para 5.15.01(i) (ii))

42.   5.19.06    State Governments often consult the Government of India at the drafting stage of a Bill. Generally, high-level officers of the State Government hold discussions on the provisions of the draft Bill with their counterparts at the Union. This is a healthy practice and should continue. (para 5.15.02).

43.   5.19.07    a) As a matter of salutary convention, a Bill reserved for consideration of the President should be disposed of by the President within a period of 4 months from the date on which it is received by the Union Government.

b) If, however, it is considered necessary to seek clarification from the State Government or to return the Bill for consideration by the State Legislature under the Proviso to Article 201, this should be done within two months of the date on which the original reference was received by the Union Government.

c) Any communication for seeking clarification should be self-contained. Seeking clarification piecemeal should be avoided.

d) On receipt of the clarification or the reconsidered Bill from the State under the proviso to Article 201, the matter should be disposed of by the President within 4 months of the date of receipt of the clarification or the back reference on the reconsidered Bill, as the case may be, from the State Government.

e) It is not necessary to incorporate these or any other time-limits in the Constitution. (paras 5.16.03 and 5.7.09).

44.   5.19.08    a) As a matter of convention, the President should not withhold assent only on the consideration of policy differences on matters relating, in pith and substance, to the State List, except on grounds of patent unconstitutionality such as those indicated in the recommendation in paragraph 5.19.01 above. (Para 5.10.06).

b) President's assent should not ordinarily be withheld on the ground that the Union is contemplating a comprehensive law in future on the same subject. (para 5.7.08).

45.   5.19.09    If a State Bill reserved for the consideration of the President under the First Proviso to Article 31A (1) or the Proviso to Article 31C clearly tends to subvert the constitutional system of the State, by reason of its unduly excessive and indiscriminate abridging effect of Fundamental Rights or otherwise, then, consistently with its duty under article 355 to ensure that the government of every State is carried on in accordance with the provisions of the Constitution, the Union Government may advise the President to withhold assent to the Bill. (Para 5.8.06 and 5.8.07).

46.   5.19.10    In cases where the Union Government considers that some amendments to a state Bill are essential before it becomes law, the President may return the Bill through the Governor in terms of the Proviso to Article 201 for reconsideration, with an appropriate message, indicating the suggested amendments. The practice of obtaining the so-called conditional assent should not be followed when a constitutional remedy is available. (Para 5.11.02).

47.   5.19.11    To the extent feasible, the reasons for withholding assent should be communicated to the State Government. (Para 5.17.01).

48.   5.19.12    State Governments should eschew the wrong Practice of mechanical and repeated re-promulgation of an Ordinance without caring to get it replaced by an Act of the legislature.(Para 5.18.12)

49.   5.19.13    In due regard to the requirement of clause (2) of Article 213, whenever the provisions of an Ordinance have to be continued beyond the period for which it can remain in force, the State Government should ensure, by scheduling suitably, the legislative business of the State Legislature, enactment of a law containing those provisions in the next ensuing session. The occasions should be extremely rare when a State Government finds that it is compelled to re-promulgate an Ordinance because the State Legislature has too much legislative business in the current session or the time at the disposal of the Legislature in that session is short. In any case, the question of re-promulgating an Ordinance for a second time should never arise. (Para 5.18.14).

50.   5.19.14    A decision to promulgate or re-promulgate an Ordinance should be taken only on the basis of stated facts necessitating immediate action, and that too, by the State council of Ministers, collectively. (Para 5.18.15).

51.   5.19.15    Suitable conventions should be evolved in the matter of dealing with an Ordinance which is to be re-promulgated by the Governor and which is received by the President for instructions under the Proviso to Article 213 (1). (para 5.18.16)

52.   5.19.16    The President may not withhold instructions in respect of the first re-promulgation of an ordinance, the provisions of which are otherwise in order, but could not be got enacted in an Act because the legislature did not have time to consider its provisions in that session. While conveying the instructions, the Union Government should make it clear to the State Government that another repromulgation of the same ordinance may not be approved by the President, and if it is considered necessary to continue the provisions of the Ordinance for a further period, the State Government should take steps well in time to have the necessary Bill containing those provisions passed by the State Legislature, and if necessary, to obtain the assent of the President of the Bill so passed. (Para 5.18.17).

53.   5.19.17    The recommendations in paras 5.19.01 to 5.19.11 will apply mutatis mutandis to the seeking of instructions from the President for the promulgation of a state ordinance. However, keeping in view the urgent nature of an Ordinance, a proposed Ordinance referred by the Governor to the President for instructions under the Proviso to Article 213 (1) should be disposed by the President urgently and in any case within a fortnight.(Para 5.18.23)


54.   6.8.01      Article 356 should be used very sparingly, in extreme cases, as a measure of last resort, when all available alternatives fail to prevent or rectify a break-down of constitutional machinery in the State. All attempts should be made to resolve the crisis at the State level before taking recourse to the provisions of Article 356. The availability and choice of these alternatives will depend on the nature of the constitutional crisis, its causes and exigencies of the situation. These alternatives may be dispensed with only in cases of extreme urgency where failure on the part of the Union to take immediate action under article 356 will lead to disastrous consequences. (para 6.7.04).

55.   6.8.02      A warning should be issued to the errant State, in specific terms, that it is not carrying on the Government of the State in accordance with the constitution. Before taking action under Article 356, any explanation received from the State should be taken into account. However, this may not be possible in a situation when not taking immediate action would lead to disastrous consequences. (para 6.7.08).

56.   6.8.03      When an external aggression or internal disturbance paralyses the State Administration creating a situation drifting towards a potential breakdown of the Constitutional machinery of the State, all alternative courses available to the Union for discharging its paramount responsibility under Article 355 should be exhausted to contain the situation (para 6.3.17).

57.   6.8.04      (a) In a situation of political breakdown, the Governor should explore all possibilities of having a Government enjoying majority support in the Assembly. If it is not possible for such a government to be installed and if fresh elections can be held without avoidable delay, he should ask the outgoing Ministry, if there is one, to continue as a caretaker government, provided the Ministry was defeated solely on a major policy issue, unconnected with any allegations of mal-administration or corruption and is agreeable to continue. The Governor should then dissolve the Legislative Assembly, leaving the resolution of the constitutional crisis to the electorate. During the interim period, the caretaker government should be allowed to function. As a matter of convention, the caretaker government should merely carry on the day-to-day government and desist from taking any major policy decision. (Para 6.4.08).

(b) If the important ingredients described above are absent, it would not be proper for the Governor to dissolve the Assembly and install a caretaker government. The Governor should recommend proclamation of President's rule without dissolving the Assembly. (para 6.4.09).

58.   6.8.05      Every proclamation should be placed before each House of Parliament at the earliest, in any case before the expiry of the two months' period contemplated in clause (3) of Article 356. (para 6.7.13)

59.   6.8.06      The State Legislative Assembly should not be dissolved either by the Governor or the President before the proclamation issued under Article 356 (1) has been laid before Parliament and it has had an opportunity to consider it. Article 356 should be suitably amended to ensure this. (para 6.6.20)

60.   6.8.07      Safeguards corresponding, in principle, to clauses (7) and (8) of Article 352 should be incorporated in Article 356 to enable Parliament to review continuance in force of a Proclamation (para 6.6.23).

61.   6.8.08      To make the remedy of judicial review on the ground of malafides a little more meaningful, it should be provided, through an appropriate amendment, that, notwithstanding anything in clause (2) of Article 74 of the Constitution, the material facts and grounds on which Article 356 (1) is invoked should be made an integral part of the proclamation issued under that Article. This will also make the control of Parliament over the exercise of this power by the Union Executive, more effective. (Para 6.6.25).

62.   6.8.09      Normally, the President is moved to action under Article 356 on the report of the Governor. The report of the Governor is placed before each House of Parliament. Such a report should be a "speaking document" containing a precise and clear statement of all material facts and grounds on the basis of which the President may satisfy himself as to the existence or otherwise of the situation contemplated in Article 356. (para 6.6.26).

63.   6.8.10      The Governor's report, on the basis of which a proclamation under Article 356 (1) is issued should be given wide publicity in all the media and in full. (Para 6.6.28).

64.   6.8.11      Normally, President's Rule in a State should be proclaimed on the basis of Governor's report under Article 356 (1). (Para 6.6.29).

65.   6.8.12      In clause (5) of Article 356, the word 'and' occurring between sub-clauses (a) and (b) should be substituted by 'or'. (Para 6.7.11).


66.   7.12.01    The existing relationship between the Union armed forces and the State civil authorities and the manner of their functioning as prescribed in the relevant Union laws and procedures do not need any change. However, before the Union Government deploys its armed and other forces in a State in aid of the civil power otherwise than on a request from the State Government or declares an area within a State as "disturbed", it is desirable that the State Government should be consulted, wherever feasible, and its cooperation sought, even though prior consultation with the State Government is not obligatory. (paras 7.5.03 and 7.7.22).

67.   7.12.02    (a) Each State Government may work out, in consultation with the Union Government, short-term and long-term arrangements for strengthening its Armed Police. The objective will be to become largely self-reliant in the matter of Armed Police so that the assistance of the Union armed forces will be necessary only in cases of very severe disturbances. (Para 7.10.02).

(b) while advising and, if necessary, assisting a State Government in strengthening its Armed Police force, the Union Government may take into account the following factors :

(i) the degree of confidence that the people of the State (particularly those living in disorder-prone areas) have in the State Police, armed and unarmed ;

(ii) if large-scale public disorders are frequent, the causes therefor, and the steps which the State Government should take on the social, economic and other fronts to prevent disorder. (Mere strengthening of Armed police may not achieve the objective);

(iii) the inadvisability of a State (particularly if it is a small State) expanding its Armed Police, if it cannot fully utilised throughout the year; and

(iv) the feasibility of more efficient utilisation of the State Police. (para 7.10.04).

68.   7.12.03    (a) A group of neighbouring States may, by consensus, have a standing arrangement for the use of the Armed Police of one another in case of need. The Union Government may devise by consensus the regional groupings, keeping in view contiguity and logistics and encourage States to participate fully.

(b) The Zonal Council would be the best forum for achieving consensus of the States within a zone for devising such an arrangement.

(c) The Union Government will under this arrangement, monitor, coordinate and control any inter-State movements of State Armed Police. It is only when it is not possible to meet the requirements of a State from within its group that the Union Government will decide whether to draw from any of its own para-military forces or from Armed Police Battalions belongings to one or more States outside the Group.

(d) A beginning may be made immediately to plan the use of Armed Police inter-State within a region.

(e) This arrangement will be only for meeting special demands for short periods from the State in a Group. Their Armed Police will not merge or get integrated but will remain distinct as hither-to. (Para 7.10.05 and 7.10.06).

69.   7.12.04    The various measures recommended by the National Police Commission in their Seventh Report for improving the effectiveness and morale of State Armed Police are commended for the consideration of State Governments. (para 7.10.07).

70.   7.12.05    The problems of cadre management, mobility, promotion prospects, etc. of police personnel in small states, especially in the north-eastern region, need to be carefully examined by the State Government in consultation with the Union Government. (para 7.10.08).

71.   7.12.06    There should be a system of interchange of the officers of the State Armed Police Forces with those of the Central Reserve Police Force, the Border Security Force and the Union armed forces. They should also have common regional training centres, so as to facilitate better exchange of techniques and information and a more integrated system of operations when the Union armed forces are deployed in aid of the civil power in a State. (para 7.10.09).

72.   7.12.07    (a) Adequate finance will be needed by State Governments for augmenting and strengthening (by way of better equipment, more vehicles, etc.) their Armed Police Battalions. The Union Government may, therefore, examine immediately the question of financial assistance to State Governments for this purpose, after taking into account the grants that are already being made available to them for the mordernisation of their police forces.

a.                                          The extent of Central assistance to be made available to State Governments for the above purpose during the next plan period may be specifically referred to the next Finance Commission. (Para 7.10.10)

73.   7.12.08    It is essential that there should be advance planning of deployment including logistics, of the Union armed forces and State Armed Police Battalions. For this purpose, the Union Government may get an expert study carried out for evolving such a system of planning. (Para 7.11.04).


74.   8.19.01    (i) The All India Services are as much necessary today as they were when the Constitution was framed and continue to be one of the premier institutions for maintaining the unity of the country. Undoubtedly, the members of the All India Services have shown themselves capable of discharging the roles that the framers of the Constitution envisaged for them

(ii) Any move to disband the All India Services or to permit a State Government to opt out of the scheme must be regarded as retrograde and harmful to the larger interest of the country. Such a step is sure to encourage parochial tendencies and undermine the integrity, cohesion, efficiency and coordination in administration of the country as a whole.

(iii) The All India Services should be further strengthened and greater emphasis given on the role expected to be played by them. This can be achieved through well planned improvements in selection, training, deployment, development and promotion policies and methods. The present accent on generalism should yield place to greater specialisation in one or more areas of public administration. Training and career development policies should be geared to this objective. Disciplinary control should aim at nurturing the best service traditions and relentless weeding out of those who fail to make the grade. Finally, there should be greater coordination and periodical dialogue between the authorities in the Union and the State Governments who are responsible for the management of these services. (paras 8.7.07 to 8.7.10).

75.   8.19.02    (i) There should be an element of compulsion in the matter of deputation of officers of All India Services to the Union. The informal practice followed by the State Governments of obtaining the consent of the officers who are to be sent on deputation should be given up.

(ii) Every All India Service officer, whether he is a direct recruit or a promoted officer, should be required to put in a minimum period under the Union Government and, for this purpose, the minimum numbers of spells of Union deputation should be laid down for direct recruits and promoted officers, separately.

(iii) State Governments should offer officers for Union deputation only after screening them. The Union Government may lay down a screening mechanism and the criteria to be followed for the purpose by every State Government. An officer so offered should not be rejected by the Union Government, except on grounds to be communicated to the State Government concerned.

(iv) Among those on deputation to the Union from a State and among those serving in the State, the number of 'insiders' and 'outsiders' should be almost equal. (para 8.9.03).

76.   8.19.03    It should be ensured, through strict observance of the tenure principle, that the services of the best among All India Service officers are not monopolised by the Union Government but are also readily available to the State Governments to whose cadres they belong.(Para 8.9.04)

77.   8.19.04    The Union Government may dissuade State Governments from using the powers of transfer, promotion, posting and suspension of All India Services officers in order to 'discipline' them.(Para 8.10.06)

78.   8.19.05 While examining an appeal against the suspension of an All India Services officer, the Union Government should invariably consult the Union Public Service Commission and accept its advice unless palpably wrong. Such a provision may be included in the All India Services (Discipline and Appeal) Rules, 1969. (Para 8.10.06).

79.   8.19.06    No change is necessary in the present disciplinary procedures relating to All India Service Officers, except in the matter of suspension as recommended in para 8.19.05 above. (para 8.10.08).

80.   8.19.07    (i) State Governments, with the assistance of the Union Government, may evolve modern and more enlightened systems of incentives for the officers of the All India Service cadres.

(ii) The political authorities in each State should strive to create an atmosphere of mutual trust and cooperation vis-à-vis the civil servants by ensuring fair and just treatment to them and encouraging the qualities of honesty, fearlessness, independence of judgement and dedication to duty.

An efficient, disciplined and contented service assured of its prospects as a result of diligent and honest work in a sine qua non of sound administration under a democratic regime. (Para 8.10.10)

81.   8.19.08    (i) There should be regular consultations on the management of All India Services between the Union and the State Governments. For this purpose, an Advisory Council for personnel administration of the All India Services may be set up.

(ii) The Council may have the Union Cabinet Secretary as its chairman and Union Secretaries in charge of individual All India Services and Chief Secretaries of State Governments as members.

(iii) The Council may be serviced by the Union Department of Personnel and Training. (para 8.10.12 and 8.11.03).

82.   8.19.09    (i) The Advisory Council recommended in para 8.19.08 will advise the Union and the State Governments. It should meet periodically and regularly and suggest solutions to the problems, referred to it by the Union and the State Governments.

(ii) The Union Department of Personnel and Training may take follow-up action on the recommendations of the Council and secure the decisions of the Union Government.

(iii) The Council may set up study teams of experts for examining specific problems.

(iv) Matters which the Advisory Council is unable to resolve may be placed before the inter-Governmental Council. (paras 8.11.04 to 8.11.05).

83.   8.19.10    The Advisory Council may address itself to the problems of the type raised by the Estimates committee and which recently have been referred by the Union Government to a special Committee. (para 8.11.06).

84.   8.19.11    The following cadre management problems should be specially examined by the Advisory council on a priority basis :

(i) More precise criteria have to be evolved for the encadrement of posts which will ensure fair promotional, prospects for the other State services and at the same time prevent undue expansion and consequent dilution of quality of the All India services. (Para 8.12.02).

(ii) Whether a State Government may be given full power to make temporary additions to an All India Service cadre. (para 8.12.04).

(iii) A system of postings and transfers has to be evolved for All India Service officers so that field work keeps alternating with policy-making and advice, till such time as the officers reach the seniormost levels in the State and the Union Governments. Also an officer appointed to a field post should continue in that post for a minimum period to be prescribed. Any deviation from the prescribed period should have the approval of a Committee of the Council of Ministers. (Para 8.13.02)

(iv) Uniform and rational policies have to be drawn up to adequately compensate officers working in difficult areas and for assisting such of them as wish to settle down permanently in the States to whose cadres they belong. (Para 8.14.02).

(v) Promotions at the State and the Union levels of All India Service Officers have to be coordinated and conflicting situations avoided. (para 8.15.02).

(vi) To ensure the All-India character of these services, State-wise reviews have to be prescribed so that "outsider-insider" ratios are maintained at a desirable level. (Para 8.16.01).

(vii) State-wise career development plans for the members of the All India Service cadres which inter-alia offer scope for greater professionalisation have to be evolved. (Para 8.16.01).

(viii) Problems of inadequate promotion and deployment opportunities in small states and formation of multi-State or Zonal cadres to meet these problems need to be examined. (para 8.16.01).

(ix) Periodical review of the system of performance appraisal of members of All India Services should be evolved. (Para 8.16.01).

85.   8.19.12    As recommended by the Estimates Committee, the Union Government may persuade the State Governments to agree to the constitution of the India Service of Engineers, the Indian Medical and Health Service and an All India Service for Education. (para 8.17.01)

86.   8.19.13    To constitute All India Services in sectors like agriculture, cooperation, industry etc.,

                        (i) To begin with, a pool of officers drawn from the Union and the various State Governments may be created in a sector;

(ii) These officers may be made available for posting for fixed tenures and with attractive special pays in Governments other than their own; and

(iii) after the pool system is worked successfully for a few years, steps may be taken to constitute an All India Service in that sector. (para 8.17.02).

87.   8.19.14    The question whether there should be a uniform age of superannuation for the employees of the Union and the State Governments may be considered, after appropriate studies, by the Inter-Governmental Council recommended in Chapter IX. (para 8.18.03)


88.   9.10.01    (a) A permanent Inter-State Council called the Inter-Governmental Council (IGC) should be set up under Article 263.

(b) The IGC should be charged with the duties set out in clauses (b) and (c) of Article 263 other than socio-economic planning and development. (paras 9.3.05,9.3.06 and 9.4.06).

89.   9.10.02    The separate identity of the National Development Council should be maintained. However, its status should be formalised and duties reaffirmed through a Presidential order passed under Article 263 and it should be renamed as the National Economic and Development Council. (Para 9.4.07).

90.   9.10.03    The Inter-Governmental Council will evolve guidelines for identification and selection of issues to be brought before it and will take a care to ensure that only such matters of national importance relating to subjects of common interest are brought up before it as would fall with the ambit or clauses (b) and (c) of Article 263. (para 9.5.01).

91.   9.10.04    (a) The Council will consist of a General Body assisted by a smaller Standing Committee. (Para 9.6.02).

(b) The General Body will consist of :

1. Prime Minister                          Chairman

2.All Chief Ministers                      Members

3.All Union Cabinet Ministers        Members

(or Union Ministers dealing with subjects of common interest to the Union and States) (Para 9.6.03).

(c)The Standing Committee will consist of :

1.Prime Minister                                                                                 Chairman

2.Six Chief Ministers one from each zone selected annually             Members

3.Six Union Cabinet Ministers to be nominated by the Prime Minister      Members

(d) The General Body of the IGC will meet at least twice a year. (para 9.6.03).

(e) The Standing Committee should meet at least four times a year. (para 9.6.05).

92.   9.10.05    Every meeting of the General Body will be held in camera and its proceedings will be conducted as in Union Cabinet Meetings. Practices and procedures laid down for Cabinet meetings may be followed by the General Body. (para 9.5.03, 9.5.05, 9.6.03 & 9.7.03)

93.   9.10.06    (a) Matters proposed to be referred to the General Body will first be discussed in the Standing Committee. Normally, such matters only as are referred by the Standing Committee will be taken up for discussion in the General Body. All other matters will normally be considered and disposed of at the level of Standing Committee

                         (b) Meetings of the Standing Committee will be held in Camera

                         (c) Any member of the General Body may attend a Standing Committee meeting with permission of the Chairman of the Committee

                        (d) The Prime Minister may nominate any other Union Cabinet Minister to preside over the Standing committee meetings when (i.e. the Prime Minister) is not present. (Para 9.6.02 & 9.6.05)

94.   9.10.07    The Inter-Governmental Council and its Standing Committee should be able to set up ad-hoc Sub Committees to investigate special matters. (Para 9.6.06)

95.   9.10.08    Procedure adopted for the Standing Committee meetings will, as nearly as may be, be the same as for Cabinet Sub-committee meetings. (para 9.7.03).

96.   9.10.09    There should be a permanent Secretariat of the Council. (para 9.7.02).

97.   9.10.10    (a) The five Zonal Councils which were constituted under the States Reorganisation Act, 1956 should be constituted afresh under Article 263.

(b) The North Eastern Council set up under the North Eastern Council Act should function as the Zonal Council for the North-Eastern States, in addition to its existing functions. (para 9.8.07).

98.   9.10.11    In the case of the five Zonal Councils, a Chief Minister may be elected Chairman annually by rotation. In the case of the North Eastern Council, the existing arrangements should continue. (para 9.8.11).

99.   9.10.12    (a) The Secretariat of each Zonal Council may be located in such State capital of one of the States constituting the Zone as may be decided upon by the IGC in consultation with those State Governments.

(b) The Secretary of the Zonal Council should be in close touch with the Secretary of the IGC for purposes of coordination and consultation in respect of matters which should come up before the IGC. (Para 9.8.10).

100.   9.10.13 The Zonal Councils should provide the first level of discussion of most, if not all, of the regional and inter-State issues. Every endeavour should be made to sort out as many as possible of these issues in the Zonal Councils, thereby reducing the burden of the Inter-Governmental Council. The Inter-Governmental Council may also refer some of the issues directly raised before it to the Zonal Councils. (Para 9.8.11).

101.   9.10.14 (a) The same procedure as in the case of IGC meetings may, as far as possible, be adopted for Zonal Council meetings.

(b) The Zonal Council, may meet at least twice a year, in the State of which the Chief Minister is the Chairman. (para 9.8.09 & 9.8.11)


102.  10.11.01 Under the present circumstances, duties on all the items covered by Article 268 do not appear to be a buoyant source of revenue amenable to frequent revisions. Since basic circumstances do not always remain constant, the Union Government should, in consultation with the State Governments, periodically consider and explore the revision or imposition of these duties. The revenue raised from these duties should be separately specified in the budget and other relevant publications.(para 10.5.13)

103.  10.11.02 The monetary limit of ‘Rupees two hundred fifty per annum’ fixed 37 years ago on taxes that can be levied on professions, trades, callings and employments (Entry 60 of List II) should be, in consultation with the States, revised upwards immediately and reviewed periodically. (para10.5.60).

104.  10.11.03 Taxation of agricultural income is a sensitive matter. Both the Union and the State Governments are not inclined at present for a change in the Constitutional provision in regard to Entry 46 of List II. Many problems have been highlighted by the Union and the State Governments in connection with the levy of such a tax. Nonetheless, in view of its potential, the question of raising resources from this source by forging political consensus and the modalities of levying the tax and collection of proceeds, etc., would require an in-depth and comprehensive consideration in the National Economic and Development Council.(Para 10.5.72).

105.  10.11.04 By an appropriate amendment of the Constitution, the net proceeds of Corporation Tax may be made permissibly shareable with the States, if and as Parliament may by law so provide. This would have the advantage of enlarging the base of devolution so that in the revenues of the States there would be greater stability and predictability, in future. Further, being an elastic resource, the States would benefit from its growth.(Para 10.6.16).

106.  10.11.05 Consequent on inclusion of Corporation Tax in the divisible pool, adjustments will have to be carried out by suitably bringing down the shares of States in Income Tax and Union Excise Duties. (para 10.6.18)

107.  10.11.06 The Surcharge on Income Tax should not be levied by the Union Government except for a specific purpose and for a strictly limited period only. (Para 10.6.26)

108.  10.11.07 The organic linkage in policies and measures adopted by different levels of government in resource mobilisation and expenditure must be duly recognised. This indeed, is the crux of Union-State financial relations. An expert Committee with suitable representation from the States, may be appointed by the Union Government to recommend desirable directions of reforms in taxation and inter alia, consider the potential for resource mobilisation by the Union and the States. The report of this Committee should be placed before the standing Finance Committee of the National Economic and Development Council for consideration. (para 10.6.34 and 10.6.36).

109.  10.11.08 Substantial expenditure is incurred by both the Union and the State Governments on such schemes which have come to be known as populist measures. It will be in the best interests of the concerned Governments to take explicitly into account the high opportunity-cost of such schemes and to examine whether any important programmes of development are compromised due to such diversion of scarce resources. (para 10.7.30).

110.  10.11.09 It is necessary that a comprehensive paper on direct, indirect and cross-subsidies, covering both Union and State Governments, is prepared by the Planning Commission every year and brought up before NEDC for discussion, since the increasing burden of subsidies has a direct relevance to the availability of resources for the execution of the plan. (para 10.7.33).

111.  10.11.10 The present division of labour which has developed over the years between the Finance Commission and the Planning Commission is that the former advises on the non-plan revenue requirements and non-plan capital gap. In certain sectors, where the problem is clear and the numbers are reasonably sure, the Finance Commission has recommended capital resource devolution also only to a limited extent. The present division of responsibilities between the two bodies, which has come to be evolved with mutual understanding of their comparative advantage in dealing with various matters in their respective spheres, may continue. (para 10.8.16 and 10.8.17).

112.  10.11.11 The Finance Commission Cell/Division proposed to be located in the Planning commission, should continuously monitor the behaviour of States' finances. It should also estimate annually the deviations from the norms evolved by the Finance Commission. The Planning Commission would then be able to bring before the National Economic and Development Council annual reviews indicating, among other things, the deviations from the forecasts of Finance Commission and the reasons for the same. This would afford an opportunity to the National Economic and Development Council to monitor effectively and evolve consensus on the mobilisation of resource and evolve consensus on the mobilisation of resources and contain the non-developmental expenditure. (Para 10.8.23)

113.  10.11.12 The Finance Commission Division should, in cooperation with the States, organise comprehensive studies on trends in growth of public expenditure in the States in the light of the findings of the previous Finance Commission. The studies conducted by the Finance Commission Division should be available well in time for the use of the next Finance Commission. (para 10.8.25).

114.  10.11.13 There is need to further strengthen the Finance Commission Division. It would result in much closer coordination between the Planning Commission and the Finance Commission if this Division were to work under the general supervision of the Member incharge of financial resources in the Planning Commission. Such an arrangement will also make available to the Planning Commission data and analysis on various parameters relevant for resource discussions for the plan and reviewing of the finances of the Union and the States. (para 10.8.30).

115.  10.11.14 Finance Commission should draw experts for assisting them in their work from various parts of the country. It would be advantageous if suitable experts are drawn from the States also for staffing the Secretariat of the Finance Commission. (para 10.8.34).

116.  10.11.15 The step taken by the Union Government to initiate a process of consultation with the States in finalising the terms of reference of the Finance Commission is in the right direction. Any consultation to be meaningful should be adequate. However, there is no advantage in formalising the same through a change in the Constitutional provisions which would introduce undue rigidity. Nonetheless, it is desirable that this healthy practice of informal consultation with the States in the matter should continue. (Para 10.8.36).

117.  10.11.16 Consideration of adequate flow of funds to the backward regions in the States would necessitate creation of expert bodies like the Finance Commission at state level also. Without such an organisation at the state level to effect regional distribution, skewness will persist in large pockets even in advanced States. State Planning and Finance Boards may be set up at State level to take an objective view of resources to be devolved to the districts. (para 10.8.51).

118.  10.11.17 Since the Sixth Finance Commission, grants for upgradation of levels of administration in the States are being provided. The crucial role of administrative/organisational support in the backward areas is a sine qua non for making the investment effective in consonance with the accepted policy of reducing regional disparities. It may even be desirable to provide in the special terms of reference of the Finance Commission to make available finances, with effective monitoring arrangements, to fill up the inter-State gap in administrative capabilities. This vital aspect should continue to receive due consideration of the Finance Commissions. (para 10.8.52).

119.  10.11.18 It is, indeed, unfortunate that the Eighth Finance Commission's final recommendations were not implemented in 1984-85 which caused serious financial problems in some States. While the recommendations of the Finance Commission are not binding on the Union Government in a technical sense, the expectation is that, as far as possible, these would not be departed from without compelling reasons. It is to be hoped that in future there would be no occasion for such departure. It is necessary that the time-schedule for the completion of the Finance Commission's work is so drawn up that it can reasonably submit its final report 4 to 5 months before the beginning of its period of operation. (para 10.8.58)

120  10.11.19 (i) As much of the information gathered by the Finance Commission as well as the detailed methodology followed by it is of public interest it should be got published, say within six months of the publication of the Report, to enable informed discussion and responsible research in the relevant spheres and better appreciation by the State Governments.

(ii) In addition, it will be a healthy practice if the observations and suggestions made by the Finance Commission on matters other than the terms of reference of the Finance Commission, are also considered expeditiously by the Government and a comprehensive statement placed before Parliament subsequently indicating its views and action taken (para 10.8.59).

121.  10.11.20 It is a matter of serious concern that even after a lapse of about five years no legislation has been brought in for giving effect to the intent of the Constitutional amendment enabling levying of the Consignment Tax. The Union Government should bring in suitable legislation in this regard without further loss of time. (para 10.9.12).

122.  10.11.21 There are complaints that the yield from certain cesses levied along with Union Excise Duties under Special Acts of Parliament have remained outside the divisible pool of resources. While it may become necessary for the Union Government to levy such cesses in view of the special needs, their application should be for limited durations and for specific purposes only. (para 10.09.20 & 10.09.21).

123.  10.11.22 The scope for raising additional resources to any considerable extent on items covered by Article 269 appears to be limited. An Expert Committee should be constituted to enquire into and review from time to time, in consultation with the States the operational feasibility of the scope for levying taxes and duties included in Article 269 and the complementary measures the State Governments would be required to take. (Para 10.9.25 & 10.9.26)

124.  10.11.23 The Constitution should be suitably amended to add the subject of taxation of ‘advertisement’ broadcast by ‘radio or television’ to the present Entry 92, List I and Article 269 (1) (f). (para 10.09.30).

125.  10.11.24 The Union Government should signify its acceptance of the Finance Commission’s recommendation in regard to the grant in lieu of the Railway Passenger Fare Tax also, alongwith other items, while placing the Explanatory Memorandum before Parliament. (para 10.09.34).

126.  10.11.25 The Finance Commissions take into account the expenditure liability of the States with respect to dearness allowance, etc., and make a provision for the same. But inflation increases both outlays and revenues. The permanent secretariat of the Finance Commission should make an annual review of the situation. If in any year the net burden of the States seems unduly heavy, the Planning Commission and the Union Ministry of Finance should jointly evolve appropriate relief measures. (para 10.09.37).

127.  10.11.26 The reviews of royalty rates on minerals, petroleum and natural gas should be made every two years and well in time, as and when they fall due. (para 10.9.40).

128.  10.11.27 A sub-committee of Finance of the Standing Committee of the NEDC may be constituted consisting of Union Finance Secretary and the Finance Secretaries of various States and Union Territories. It will consider all such matters calling for coordination of economic policies as may be entrusted to it by the NEDC or its Standing committee. This Body will report to the Standing Committee of the NEDC. Since Planning Commission would be providing the secretariat support to the NEDC, the same may be extended for this body also. This will ensure expert consideration of various aspects of the problems and adequate consideration of the views of the Union and the States/Union territories. The role of this committee will be deliberative and advisory and helpful in forging a consensus on financial matters. (Para 10.9.50)

129.  10.11.28 The distinction made by the Seventh and the Eighth Finance Commissions in providing a more favourable flow of central assistance for floods, cyclones, etc. vis-à-vis a drought situation, may continue. (para 10.9.66).

130.   10.11.29 (i) The Central Team to assess the damage caused by natural calamities should invariably be headed by the Adviser incharge of that State in the Planning Commission, as was the practice in the past.

(ii) In the event of a natural calamity, relief must be given immediately. A procedure which enables States to expeditiously provide necessary succour and relief to the affected people should be evolved, in consultation with the States, along with suitable norms in regard to the scale of relief. Formulation of standard formats for submission of memoranda by the States will greatly help the Union in dealing with the requests of various States urgently and on a uniform basis. (para 10.9.67 and 10.9.68).

131.  10.11.30 In a calamitous situation, the States should have a reasonable discretion to make inter-district or inter-sectoral adjustments. To allay the apprehension that the expenditure pattern adopted under the stress of urgency may not find approval norms in regard to items of expenditure which are to be incurred immediately, e.g., relief by way of issue of foodgrains, clothing and rebuilding or shelters in the event of floods may be evolved by the Union and communicated to all State Governments. (Para 10.9.69).

132.  10.11.31 Relief assistance should extend beyond the financial year. The assistance required till the next June/July should be decided in the beginning itself so that relief works can be properly planned and executed. (para 10.9.70).

133.   10.11.32            There appears to be tendency to bring in non-productive schemes and programmes under the capital head in order to expand the plan size. In future plans, for reasons of financial propriety this Sector, though small, has to be weeded out of the capital budget and put under the revenue budget. It is better to tackle the situation at this stage whilst the problem is marginal. (Para 10.10.16).

134.  10.11.33 The rationality of transfers from the Union to the States would involve more of revenue transfers to the less developed States with lower repayment capacity and weak financial base. In contrast, keeping in view the needs of development in the advanced States, a suitable mix of budgetary and non-budgetary access to capital resources may be allowed to them. The logic is that such States are in a better position to service commercial borrowings (Para 10.10.34).

135.  10.11.34 The flow of capital fund from various sources to the States and their allocation among them should from part of an integrated plan. This task may be attended to by the Planning Commission in consultation with the Ministry of Finance and the Reserve Bank of India and got approved by the National Economic and Development Council as part of Plan financing. (para 10.10.36).

136.  10.11.35 The Union Government should give its consent freely to States for borrowing from banks and financial institutions for periods less than one year under clause (4) of Article 293. (para 10.10.39).

137.  10.11.36 The Union Government has now allowed the States public sector units to raise funds on merit by floating bonds. In practice, the considerations relating to merit of a State's enterprise should not put them to any disadvantage vis-à-vis the Union Governments' Undertakings. (para 10.10.40).

138.  10.11.37 The system of tax-free municipal bonds should be introduced in this country. (para 10.10.41).

139.  10.11.38 Treatment of small savings loan is a matter of judgement by the Finance Commission in relation to the overall debt burden of the States. As long as small savings keep increasing and there is a surplus every year after repayment of due loans, the Union is not called upon to repay any loan not already covered by the net transfer principal. If and when the position changes in any year, when the outgo is greater than the inflow, the States would be responsible for their share of the net small savings collections. If a formula is adopted for such recoupment of revenue from the States, the recommendations of the Finance Commission will be workable. This aspect will have to be examined by the National Economic and Development Council (para 10.10.44).

140.  10.11.39 Any problems in the working of the arrangements concerning flow of development finance from the financial institutions should be looked into by the sub-committee on Finance of the Standing Committee of NEDC.(Para 10.10.49)

141.  10.11.40 No change in the existing procedure of channelling external aid for projects is suggested. However, much misunderstanding would be avoided if at the time of consideration of the Five Year Plan, all relevant factors taken into consideration in this regard are placed before the National Economic and Development Council. (Para 10.10.53).

142.  10.11.41 The seasonal range of weekly Ways and Means "demand" compared to the prescribed limits should be carefully studied every year for the preceding triennium in the light of price-trends, separately for each state, by the Reserve Bank and taken into account in re-fixing quarterly Ways and Means limits for the State. The period of overdrafts should be extended from 7 to 14 days in view of the prevailing timelag in collecting relevant information from various Treasuries. Simultaneously, steps should be taken to modernise the treasury system. (para 10.10.68).

143.  10.11.42 The following two proposals may be considered by the Union Government :-

(a) Free foreign exchange to the extent of a small fraction of a State's annual budget should be placed at its disposal. This will introduce flexibility which will help reduce much of the present irritation.

(b) In each State capital and in the headquarters of remote but important districts of the bigger States, a designated officer of the State Bank of India (or some other nationalised Bank) should be given powers of Deputy Controller of Foreign Exchange of the Reserve Bank of India, in case an officer of the Reserve Bank itself is not located there. This will go a long way to help the local public especially small and medium businessmen. (para 10.10.71).

144.  10.11.43 It will be useful if the Union Government appoints an Expert Team to look into the special difficulties of the people in remote States and districts in matters like issue of shares, bonds, licences, permits, etc. for which they have now to come to New Delhi, and suggest measures for delegating the powers to some officers or agency under its control at the headquarters of each State and remote but important districts of the bigger states. (Para 10.10.72).

145.  10.11.44 Flow of direct assistance and refinance through cooperatives and other institutions to agriculture and private enterprises in other sectors does not generally fall within the ambit of Union-State financial relations. However, given the overall development and equity considerations, it is too important to be ignored. Undesirable politicisation of the cooperative system, thus leaving untapped substantial institutional finance which could be available for development, has been noted by expert studies. In the context of consideration of institutional finance to the private sector, two aspects become pertinent. One is that scarce capital resources in our country carry a high opportunity-cost. Therefore, their optimum use is a must. The second aspect is that notwithstanding the preferential and concessional finance facility offered, people in the less developed States have not been able to avail of the institutional finance to the desired extent. It is necessary to develop organisational capabilities and enterprise urgently in such States. (para 10.10.73 and 10.10.74).


146.  11.9.01 Taking an over-all view from the conceptual institutional and functional aspects, planning both at the formulation and execution stages has to be a cooperative process of shared action between the Union and the States.

(a) NEDC should be involved in the formulation of the plans right from the beginning. Selection of studies and setting up of various working groups should be done under the guidance of the Standing Committee of the NEDC.

(b) The draft Approach paper should be circulated to the States at least two months in advance of the meeting of the NEDC to consider the same. It should contain all relevant data, alternate strategies etc.

(c) A preparatory meeting should be held by the Planning Commission, with all Deputy Chairman and or secretaries of the States Development Boards two weeks prior to the NEDC to consider the Approach paper/Draft Five Year Plan for identifying the main issues and firming up the agenda for the meeting of the NEDC.

(d) Deliberation in the NEDC should be so structured as to facilitate meaningful discussions on each item of the agenda. Sufficient time should be available for the same, so that, after the general statement by the Prime Minister and Chief Ministers, there is enough time for discussing individual items of the agenda. Minutes of the discussion in the NEDC should be recorded itemwise. It will help provide more time for discussion if prepared general statements of Chief Ministers are circulated before-hand and the Chief Ministers read out only a brief summary. (Para 11.2.04 & 11.5.22).

147.  11.9.02 Close and fullest involvement of the States at all stages of Plan formulation is very essential for the successful implementation of the same.

(a) On the working Groups set up to study sectoral problems in the context of formulation of the Five Year plan, concerning State subject the Deputy Chairman, Planning Commission should appoint a member of a State Planning Board as Chairman and the Secretary of the concerned Union Ministry as Vice-Chairman and an officer of the Planning Commission as Member-Secretary.

(b) Coordinated action between the Central and State Working Groups should be ensured. For this, the Central Working Groups themselves should take the initiative in establishing contact with their counterparts in the States at an early stage.

(c) The draft Approach paper should be circulated to the States at least two months in advance of the meeting of the NEDC to consider the same. It should contain all relevant data alternate strategies, etc. (paras 11.5.10, 11.5.12 & 11.5.22).

148.  11.9.03 For improving the procedure of State Plan, the following are essential :

(i) In the Financial Resources working group, the estimation of plan resources should be realistic, estimates of additional resources to be mobilised by a State, as approved by the Chief Minister, should be available to the Financial Resources Working Group.

(ii) Planning Commission should not try to scrutinise in detail all the individual sectoral schemes in the States plans but concentrate on key ones involving large outlays, foreign exchange component, and inter-sectoral aspects. Most of these belong to the core-sector plan and have their outlays earmarked. Financial provision for these should be ensured.

(iii) The practice of States submitting Plan proposals aggregating to much higher plan-size than that warranted by resources estimated by the Resources working Group, should be firmly discouraged by the Planning Commission. Every effort should be made to consider all resources likely to be available at the stage of discussions in the Resources Working Group itself.

(iv) The meeting between the Deputy Chairman, Planning Commission and State Chief Ministers should concentrate on evaluating the progress made, identification of bottlenecks, review of deviations from plan priorities and the implementation of the programme for the ensuing year. Substantial changes in the size and content of the plan and allocation of outlays should not generally take place in this meeting.

(v) If the Plan-size of a State is agreed to be substantially enhanced at the meeting between Deputy Chairman, Planning Commission and the State Chief Minister on the promise of new resources, this should be regarded as provisional and the feasibility of the same and the priority of allocation of the additional amount should be subsequently gone into by the Adviser (State plans) in consultation with the subject-Divisions in the Planning Commission. (para 11.5.37).

149.  11.9.04 The norms and conditions for prior approval of projects/schemes by the Union Government, Planning Commission and Central Electricity authority should be reviewed every fifth year or earlier, if need be, and got approved by the National Economic and Development Council. (Paragraph 11.5.43)

150.  11.9.05   As the different components of central assistance for the State plans got incorporated at different points of time, a review is over-due. In view of acute over all constraint of resources, a system will have to be evolved which, while ensuring a measure of equity, would at the same time encourage efficiency in the mobilisation and use of resources. The NEDC is the most appropriate forum where such matters should be discussed and national consensus arrived at. (Paragraphs 11.6.07& 11.6.08)

151.  11.9.06 A time has come to review the two-fold loan-grant pattern of Central assistance, 70:30 and 10:90, and replace it by a suitable three or four-fold pattern such as 70:30, 50:50 and 20:80 or 90:10, 60:40, 40:60 and 10:90 respectively, taking into account loan servicing capacity of the States and their per capita State Domestic Product. A decision may be take by the NEDC on this after expert examination by Planning Commission and consideration of various options. (Para 11.6.10).

152 11.9.07     A segmented approach in respect of the channelling of Central assistance for externally aided projects should not be followed. However, it will be desirable that the entire rationale and procedure is explained or clarified for a better understanding to the NEDC. (Paragraph 11.6.13)

153.  11.9.08 A periodic review of the system of earmarking of outlays is desirable and should be discussed and approved by the NEDC alongwith other aspects of the Central assistance mechanism before the beginning of each Five Year Plan. (Paragraph 11.6.16)

154.  11.9.09 The number of Centrally sponsored Schemes should be kept to the minimum. In this regard the criteria laid down by the Rammurti Committee should be adhered to. The need for the Union Government initiating pilot projects even in regard to subjects in the States' sphere, having an inter-State, regional or over-all countrywide significance but carrying high national priority, is recognised, but these should be formulated in prior consultation with the States. Once a programme has passed the pilot stage and has been accepted as desirable for implementation on a larger scale, it should appropriately form part of the State Plans. (para 11.6.25).

155.  11.9.10 The Central assistance towards the centrally sponsored schemes should be kept to a minimum in relation to the Central assistance for the State Plans. The ratio of these recommended by the NEDC from time to time, should be adhered to. (para 11.6.26).

156.  11.9.11 The Centrally Sponsored Schemes should not be normally started during the middle of Five Year Plan. Should it become necessary to initiate any Centrally Sponsored Scheme during the course of Five Year Plan, its approval by the Standing Committee of the NEDC should be obtained. The entire expenditure on such a scheme, at leas till the expiry of that Five Year Plan, should be borne by the Union Government. (Para 11.6.27).

157.  11.9.12   The State Governments should be fully involved in determining the contents and coverage of the Centrally sponsored scheme so that local variations and likely difficulties in their implementation are taken care of. Even after formulation of the schemes sufficient flexibility should be allowed to the States in adapting them to local conditions. The Centrally Sponsored Scheme should be discussed with the States, individually, along with their Five Year Plans and again during the Annual Plan discussions. (Para 11.6.28).

158.  11.9.13 An overall comprehensive review of Centrally Sponsored Scheme should be made periodically by the Planning Commission and it should be placed before the NEDC for consideration. (Para 11.6.30).

159.  11.9.14   The process of decentralisation, in respect of formulation and evaluation of Centrally sponsored Schemes, should be pursued further and differences in local conditions given proper weightage specially with reference to agriculture and poverty alleviation programmes, like IRDP, NREP and RLEGP. (Para 11.6.31).

160.  11.9.15   If the Planning Commission is reconstituted by a statute giving it an autonomous status, divorced from the political executive of the Union, its working will be stymied by legalism, rigidities and technicalities which are inherent in inflexible statutes. The task of Planning Commission are now over-seen by the NDC. This arrangement has well answered our Planning needs.*** The remedy, therefore, lies in reforming these institutions and their working assuring at the same time full and effective consultation with the States at all stages of the Planning process so that they feel that their role in it is not that of a supplicant but of an equal participant. ***If healthy conventions are established in regard to consultation with the Planning Commission and due weight is given to its recommendations, then all apprehensions in regard to domination by the Union and Planning Commission being a limb of the Union Government would disappear. The Planning commission must be consulted in taking all major investment decisions. (paras 11.7.11, 11.7.14, 11.7.15, 11.7.16 and 11.7.17).

161.  11.9.16   To remove any misgivings about Planning Commission's capacity to act objectively, experts with established reputation for professional integrity and calibre should be appointed to its panel for specified term. (para 11.7.19).

162.  11.9.17   The Deputy Chairman should invariably be an eminent expert, who can command the respect of the Union, as well as the State Governments, by his objectivity and stature and should not be seen as a political appointee. (para 11.7.20).

163.  11.9.18 After the report of the Finance Commission, the occasion for a review of the Union and States finances arises in the context of resource exercise for the Annual and Five Year Plans. It is of utmost importance that the complement of non-plan finances of the States is looked into in detail by the Resource Working Group of the Planning Commission. Detailed analysis of any aberrations and significant deviations from the norms of the Finance Commission should be made. (para 11.7.24).

164.  11.9.19   Planning Commission should pay special attention to the efficacy of the monitoring system in the Government by advising on techniques and formats. At the same time, it may continue monitoring of specific programmes and keep itself abreast with the progress in the core and priority sectors. (para 11.7.26).

165.  11.9.20   Besides the general reviews contained in the Annual Plan and the mid-term appraisal, a comprehensive quinquennial review should be brought out by the Planning Commission, which should be taken advantage of in finalising the next Five Year Plan. (para 11.7.27).

166.  11.9.21 The Advisers (State Plans) must visit the States more frequently as they have a key role in bringing about a close relationship between the States and the Planning Commission. They could be permanent invitees to the meetings of the State Planning Boards. (para 11.7.28).

167.  11.9.22 In order to build expertise in the Planning Commission, the officers in senior posts should not only have the desired specialisation and competence, but should also serve in the organisation for sufficiently long periods. Serious attention to this aspect will have to be given by the Planning Commission itself. (para 11.7.29).

168.  11.9.23   As part of a Staff Exchange Programme, officers from the Planning Commission and the State Governments at middle echelons should serve at each other's place for reasonably sufficient periods and suitable incentives and facilities made available to them. (para 11.7.30).

169.  11.9.24 The very concept of Planning postulates cooperative endeavour in the service of the common man. In a large and diverse country like ours, planned development is critically dependent on consensus and commitment at all levels to be objectives and strategies of the Plans formulated and implemented from time to time. The NDC should be made to function more effectively and emerge as the highest political level inter-Governmental body for giving a direction and thrust to planned development of the country. Being the supreme inter-governmental body for all matters related to socio-economic development, it is necessary that NDC should be renamed and reconstituted as national Economic and Development Council (NEDC) by Presidential Order under the provisions of Article 263 so as to have moorings in the Constitution. (para 11.7.41 to 11.7.43).

170.  11.9.25 The NEDC or its Standing Committees should meet regularly to consider important economic issues of national significance in addition to the usual developmental issues. (para 11.7.44).

171.  11.9.26   NEDC should formulate its own procedures to enable it to discharge its responsibilities. (Para 11.7.45).

172.  11.9.27   The Secretary of the Planning Commission shall act as Secretary to the National Economic and Development Council and the Planning Commission shall provide such administrative or other assistance for the work of the council as may be needed. (para 11.7.46).

173.  11.9.28 A Standing Committee of the NEDC should be constituted consisting of the Prime Minister, Finance Minister, three other Union Ministers nominated by the Prime Minister, Deputy Chairman of the Planning Commission and Governor, Reserve Bank of India and six Chief Ministers, one from each zone selected by rotation or consensus. This Standing Committee should also be constituted under article 263 alongwith NEDC. The NEDC may, however, set up other committees or Sub-Committees to advise it or the Standing Committee on special issues. (para 11.7.48).

174.  11.9.29 The State Planning Boards should perform similar functions for the State Governments as the Planning Commission does at the national level. The Chief Minister should be Chairman of the State Planning Board as his active support and involvement will be essential for the success of the State level planning. (Para 11.7.55)

175.  11.9.30 In any negotiation and discussion with the Planning Commission, the Deputy Chairman or some Member or senior officer of the State Planning Board should invariably represent the State Government, except where participation of the Chief Minister is considered necessary. (para 11.7.56).

176.  11.9.31 Consultation with District Planning Boards should be made obligatory for formulating plans at higher levels. (para 11.7.57).

177.  11.9.32   The institutions like Zila Parishads and elected municipal corporations need to be significantly strengthened both financially and functionally. Regular elections and sessions of these institutions is a must and means for ensuring the same in all the States uniformly should be evolved by the Union Government in consultation with National Economic and Development Council. For this purpose, a legislations analogous to Article 172 and 174 of the Constitution, should be undertaken as suggested at para 21.2.09. (para 11.8.07 and 11.8.08).

178.  11.9.33   It is necessary to evolve a mechanism like Finance Commission at the State level to enable the State Government take an objective view of resources to be divolved or transferred to the Districts. The State Planning Boards can conveniently and with advantage be entrusted with this function. This body could then be designated as State Planning and Finance Board. (Para 11.8.09).


179.  12.11.01 If Union control of a specific aspect of an industry is considered expedient in the public interest, it would be advisable that the IDR Act is suitably amended to facilitate the Union Government’s regulation of that aspect only. Parliament may have to pass a separate law under Entry 52 of List I... If such new legislation presents any serious difficulty, an alternative may be to replace the present First Schedule of the IDR Act by several Schedules, each of such would specify the purpose for which a particular control was imposed on an industry so that all other areas of Entry 24 of List II remain unoccupied by the Union. The Planning Commission, in consultation with the Ministries of Industry and Law and Justice, should prepare a paper on this subject for the consideration of the NEDC at an early date. (Paragraph 12.5.09)

180.  12.11.02 As a mandatory legal requirement, there should a periodical review, say, every three years, to determine whether in respect of any of the industries the Union’s control should be continued or relaxed or lifted. Such a review may be undertaken by a Committee of Experts on which the State Governments should be represented on a Zonal basis. The result of the review may also be placed before the NEDC. (Paragraph 12.5.10)

181.  12.11.03 It would be desirable to have the representatives of the State Governments on the Central Advisory Council. Recently, the Union Government has provided for observers from the States on the Central Advisory Council on a zonal basis. This is a step in the right direction. But there is a case for raising the status of such representation of the States from that of Observers to Members. (para 12.5.11)

182.  12.11.04 In the context of undue delays in industrial approvals, a useful corrective may be to appoint an ‘Empowered Committee’ for taking a final decision, subject to a sort of "sun-set" rule that if any link or agency does not give its comments by the due date, the Committee will take a decision without waiting for it. (para 12.6.03)

183.  12.11.05 Delegation of powers, to the extent permissible under Section 25 of IDR Act, to the State Governments, would lead to convenience and efficiency in the implementation of the Act, the full enforcement of which, in any case, has to be secured with the cooperation of the machinery of the States. Where delegation of powers to States may not be desirable, greater decentralisation through the Union’s own agencies should be considered. {Para 12.6.10}

184   12.11.06 In a number of cases, not involving large investments, it will be conducive to public convenience, quick disposal and efficiency in administration, if licenses are issued to the entrepreneurs from offices located in the States. The Union Government may consider opening licensing offices not only in four or five metropolitan cities but also in all State capitals and two or three other important towns in big States and vest them with adequate powers. (Paragraphs 12.6.11 and 12.6.12)

185.  12.11.07 In order to reduce the possibility of any misunderstanding on locational decisions, a comprehensive paper be prepared every year for discussion at the NEDC, giving, inter alia, information separately for new large-scale (i) ‘foot-loose’ and (ii) ‘non-foot-loose’ industries in (a) public and (b) private sectors on some key-aspects, e.g. location investment raw-material source, output, employment, assistance expected from local governments and date of start and completion. (Paragraph 12.7.08)

186.  12.11.08 A comprehensive examination of the problems of small-scale, cottage and village industries was carried out in the three reports of the National Committee on the Development of Backward Areas, viz., on Industrial Dispersal, Industrial Organisation and Village and Cottage Industries. Its suggestions should receive the full attention of the Union and State Governments. (Para 12.9.03)

187.  12.11.09 Adequacy or otherwise of criteria for identifying industrially backward areas and suggestions for units below district level, etc. are matters for consideration by the Union Government to which the State Governments can make recommendations. It will be useful if the subject is included in the agenda of the NEDC at least once every three years. (para 12.10.04)

188.  12.11.10 The States will have to take effective steps, in cooperation with other agencies, to develop in areas which are lagging behind, capabilities of local entrepreneurs to avail of the incentives that are being provided. The monitoring of the utilisation of incentives for intended uses is very necessary. The Ministry of Industry has recently started collecting unit-wise information of Central Investment Subsidy and shall be computerising it. Appropriate follow-up action, down to the field level, needs now to be taken. (para 12.10.05 and 12.10.06)


189.  13.7.01 Proviso to Section 9 of the MMRD Act should be amended to reduce the period specified therein for revision of royalty rates from four years, to two years. (para 13.5.08).

190.  13.7.02 There should be periodic dialogue between the Union and the States in respect of revision of royality rates under MMRD Act and imposts under entries 49 and 50 of List II. (Para 13.5.12)

191.   13.7.03 A Judicial Tribunal should replace the existing administrative body under Section 30 of the MMRD Act for hearing the revision petitions, etc. (para 13.5.14)

192.  13.7.04   There should be periodic review of the First Schedule to the MMRD Act, in consultation with the Sates, every three years. (para 13.5.15).

193.  13.7.05 Any amendment to the MMRD Act should normally be preceded by consultation in NEDC.(Para 13.5.15)

194.  13.7.06 With reference to the issue raised by Government of Nagaland concerning sub-clause (a) (iv) of Article 371A(1), dialogue and discussions should be carried out between the Union and the State Government in a spirit of give and take and trust, as symbolised by the Sixteen point Agreement between the Government of India and the Naga People's Convention in 1960. The needs of the State and national interest would be best served by adopting a pragmatic approach to the whole issue. (para 13.6.12).


195.  14.10.01 Only those schemes which satisfy the criteria laid down by the Ramamurti Committee and have inter-State regional of national significance, should be included as Centrally Sponsored Schemes. (Para 14.5.06).

196.  14.10.02 The Centrally sponsored schemes should be formulated in consultation with the States, so that they get included not because of the financial tag attached to them but due to common appreciation by both the Union and the States that these are areas of high priority within the framework of the national plan. (para 14.5.09).

197.  14.10.03 The issues like levels of prices and uniformity or otherwise of minimum prices, should best be left for consideration by an expert body like the commission for Agricultural Costs and Prices. Any problem in regard to national policy in the area of fixation of prices could appropriately be considered thereafter by the National Economic and Development Council, if necessary. (para 14.6.05).

198.  14.10.04 There should be an active involvement of the States in planning of fertilizer distribution. (Para 14.7.07)

199.  14.10.05 It is not the enlargement of representation on NABARD that will secure flow of adequate credit to the States, but building up of an efficient organisation to enable the farmers and others to avail of institutional credit. The groundwork in this regard will have to be done by States themselves. Adequate fora in the form of Advisory Council at the national level, Advisory Committees for Technical Schemes and District Consultative Committees exist wherein the States can represent their view-point and sort out operational difficulties, if any. States' representation on the Board of Directors of NABARD need not be enlarged beyond what it is today. (para 14.8.05).

200.  14.10.06 Various committees have drawn attention to the fact that politicisation, malfunctioning of elected bodies and lack of professional competence in management is paralysing the cooperative credit system in some States. Attention has also been drawn to choking of the cooperative system due to heavy arrears. The working of cooperative credit system should be reviewed and periodically by the NEDC in detail and discipline enforced in this regard. (para 14.8.06 and 14.8.07).

201.  14.10.07 In view of underdeveloped state of agricultural research in several States, the Union Government should continue guiding the States in this regard and helping them organise their own research network. There is also need to strengthen the coordination between the field institutions of the ICAR and the States' agencies so that the latter may draw upon their expertise. Staff exchange programmes between the two may also be encouraged to share experience and expertise. (para 14.9.05).


202.  15.5.01 In view of a large number of cases referred under Section 2 of the Forest (Conservation) Act, 1980 having been closed there is need for reviewing them to identify the reasons. A senior officer of the Ministry of Environment, Forests and Wild-life should examine all such cases which have been disposed off as closed, identify the reasons and inform the states. Cases which are required to be followed by the States should be reopened and decided on their merits after discussion with the representatives of the concerned State Governments. (para 15.4.09).

203.  15.5.02 Powers should be delegated to the States to divert, to a small extent, say not exceeding 5 hectares, of reserved forest lands, which are urgently required for specific public purposes. (para 15.4.14).

204.  15.5.03   Conservation and improvement of Forest resources is of utmost importance to the nation. A concerted action by both the Union and the States is imperative. At the same time, it is necessary to ensure that development efforts are not hampered. A bi-annual review of pending cases should be carried out in consultation with each State Government concerned. This occasion should also be utilised for reviewing the sanctions by virtue of powers recommended by us, to be delegated to them. (paras 15.4.15 and 15.4.16).

205.  15.5.04   In the case of large projects involving significant extent of submersion of reserved forests or their diversion to non-forest uses, clearance under Section 2 of the Forest (Conservation Act, 1980) should be given as far as possible simultaneously with the project clearance by the Union Government. Agencies of the Union Government may be associated right from the beginning with the formulation of the project so that adequate measures not only to compensate for the loss of reserved forests but also to improve forest resources, can be built into them ab initio. (Paras 15.4.17 to 15.4.19).


206.  16.13.01 (i) The existing Advisory Council on Public Distribution System may undertake a periodical review of foodgrains management aspect also. For that purpose, it may be renamed as the Advisory Council on Food-grains Management and Public Distribution.

(ii) In the field of foodgrains management, the Advisory Council proposed above may discuss and arrive at a consensus on matters like.

- Long-range policy on each major aspect of food-grains management; and

- Steps to be taken by the various Governments to implement the above policies.

(iii) For the above purposes and also for examining major problems of food management and Civil supplies operations, as and when they arise, the Council may set up special Task Forces consisting of official and, where necessary, non-official experts. While setting up a task Force for examining problems which concern particular States, the Council should consult those State Governments including their official agencies. (paras 16.5.06 and 16.5.07).

207.  16.13.02 (i) There should be an indepth review of the working of the Essential Commodities Act and other regulatory parliamentary Acts in the field of food and civil supplies and a high level committee should be set up for the purpose. Apart from simplifying the laws in question and the orders made thereunder, the review should aim at identifying the areas where a State Government could be given greater freedom of action, so that they would not have to seek the prior approval of the Union Government in any minor case. (para 16.6.04)

(ii) Apart from simplifying the orders, detecting obsolete ones and providing for greater delegation of powers and functions to State Governments and their officers/authorities, the review should enable the Union Government to bring out a single, self-contained and up-to-date order on each essential commodity or a group of them. This review may be undertaken immediately and thereafter repeated every 5 years. The review should also enable identification of commodities which need no longer be classified as "essential". (para 16.6.05)

(iii) During the interregnum between one quinquennial review and another, changes may continue to be made in the ECAor the Orders issued thereunder, in order to meet the exigencies of an emergent situation. For that purpose, the position in regard to supply and demand of essential commodities may be kept under constant study and review between the Union and the States. (para 16.6.05)

208.  16.13.03 (i) The Union Departments of Food and Civil Supplies may urgently examine in consultation with the State Governments the possibility of enhancing the powers delegated to them. It should be possible to complete this work to the satisfaction of the State Governments within a period of 6 months or so.

(ii) In future, a control order may be issued after consulting State Governments whenever feasible, so that the practical difficulties that they might encounter in implementing the Order can be taken into account. (para 16.7.05)

209.  16.13.04 (i) The Advisory Council and Food Management and Public Distribution recommended in para 16.13.01 above may set up a Task Force for evolving (a) for the use of the States, a prototype of a monitoring system and methodology for monthly planning and (b) for the use of the Union, a scientific system of planning and allocation. Both the monitoring system and planning methodology should be simple and capable of being understood and worked by the functionaries concerned. (para 16.9.11).

(ii) Special schemes which have been undertaken or are proposed to be undertaken by State Governments to make certain essential commodities available to the weaker sections of the society at prices lower than for others, should broadly conform to the national policies laid down by the Union Government for the alleviation of poverty and the welfare and development of the weaker sections. There should be an understanding between the Union and the State Governments in regard to the specific schemes for these purposes and the special allocations of foodgrains, etc. to be made available to the concerned State Governments. (para 16.9.12).

210.  16.13.05 (i) The Union Government may get the measures for improving the working of the public Distribution system (vide para 16.11.03) implemented effectively in all Union Territory Administrations. The working of the PDS in these Territories would then serve as a model for State Governments.

(ii) The Union Department of Civil Supplies should have a well-equipped Research and Intelligence Wing. The Wing should systematically collect data about the good organisational and procedural innovations evolved in the various States and Union Territories and make these details available to all the State and UT Governments. It should also provide expert advice to State Government and agencies on the various aspects of the working of the PDS. Further, in the case of large States, the Wing should provide technical assistance to the State Governments in installing computerised systems for purposes of planning, monitoring etc.

(iii) The Advisory Council on Food Management and PDS recommended in para 16.13.01 above should commission studies on problems such as reduction of transportation/distribution costs, subsidising transportation costs for hilly and far flung areas, forecasting market trends, etc. for the PDS. (para 16.11.04)

211.  16.13.06 The Advisory Council on Food Management and Public Distribution may constitute a Committee to examine the problems faced by the State Governments in the matter of construction and hiring of warehouses and godowns for storage of foodgrains. (para 16.12.02).


212.  17.6.01   Once an application under Section 3 of the Inter-State River Water Disputes Act (33 of 1956) is received from a State, it should be mandatory on the Union Government to constitute a Tribunal within a period not exceeding one year from the date of receipt of the application of any disputant State. The Inter-State River Water Disputes Act may be suitably amended for this purpose.(Para 17.4.11)

213.  17.6.02   The Inter-State Water Disputes Act should be amended to empower the Union Government to appoint a Tribunal, suo-moto, if necessary, when it is satisfied that such a dispute exists in fact.(Para 17.4.14)

214.  17.6.03 There should be a Data Bank and information system at the national level and adequate machinery should be set up for this purpose at the earliest. There should also be a provision in the Inter-State Water Disputes Act that States shall be required to give necessary data for which purpose the Tribunal may be vested with powers of a Court. (Para 17.4.15 & 17.4.16)

215.  17.6.04 The Inter-State Water Disputes Act should be amended to ensure that the award of a Tribunal becomes effective within five years from the date of constitution of a Tribunal. If, however, for some reasons, a Tribunal feels that the five years period has to be extended, the Union Government may on a reference made by the Tribunal extend its term.(Para 17.4.17)

216.  17.6.05   The Inter-State Water Disputes Act, 1956 should be amended so that a Tribunal’s award has the same force and sanction behind it as an order or decree of the Supreme Court to make a Tribunal’s award really binding. (para 17.4.19).


217.  18.05.01 Free flow of trade, commerce and inter-course within and across inter-State borders is an important pre-requisite for ensuring economic unity, stability and prosperity of a country having a two-tier polity. Limitations for the common good are inherent in such freedom, lest it should degenerate into a self-defeating license. (para 18.1.01).

218.  18.5.02 Notwithstanding the fact that the word 'reasonable' is not used in Article 302, a law imposing restrictions under Article 302, would be open to judicial review on the ground that it has no reasonable nexus with the public interest alleged. The proposal for insertion of the word 'reasonable' before the word 'restriction' in Article 302 is thus merely of theoretical significance and cannot be supported. (paras 18.3.03, 18.3.04 and 18.3.05).

219.  18.5.03   Intra-State trading activities often have a close and substantial relation to inter-State trade and commerce. State laws though purporting to regulate inter-State trade may have implications for inter-State trade and commerce. These may impose discriminatory taxes or unreasonable restrictions impeding the freedom of inter-State trade and commerce. If clause (b) of Article 304 is deleted, the commercial and economic unity of the country may be broken up by State laws setting up barriers to free flow of trade and intercourse through parochial or discriminatory use of their powers. (para 18.3.13).

220.  18.5.04   The scheme of the Articles in part XIII, considered as a whole, is well balanced. It reconciles the imperative of economic unity of the Nation with interests of State autonomy by carving out in clauses (a) and (b) of Article 304, two exceptions in favour of State legislatures to the freedom guaranteed under Article 301. (para 18.3.14).

221.  18.5.05   The whole field of freedom of trade, commerce and intercourse bristles with complex questions not only in regard to constitutional aspects but also in respect of the working of the arrangements on account of impact of legislation of the Union on the powers of the States and the effect of legislation on both the Union and the States on free conduct of trade, commerce and intercourse. Considering the intricate nature and the need for objective examination of the wide-ranging issue connected with the freedom of trade, commerce and inter-course, it is recommended that an expert authority should be constituted under article 307. Among other things, such an authority may be enabled to :

(a) Survey and bring out periodically a report on the restrictions imposed on intra-State and inter-State trade and commerce by different governments and their agencies ;

(b) recommend measures to rationalise or modify the restrictions imposed to facilitate free trade and commerce;

(c) examine complaints from the public and the trade in this regard; and

(d) suggest reforms in the matter of imposition levying and sharing of taxes for purposes of part XIII of the Constitution.

The ambit of Article 307 is wide enough to bring all matters relevant to freedom and regulation of trade, commerce and intercourse within the purview of such an authority for carrying out the purposes of Artricles 301, 302, 303 and 304. It is entirely left to the judgement of Parliament to clothe the authority under Article 307 with such powers and duties as may be considered necessary. Such an authority may have both an advisory and executive role with decision-making powers. To begin with, such an authority may be assigned an advisory role. In course of time in the light of experience gained, such additional powers as may be found necessary, can be conferred on it. (paras 18.4.04, 18.4.07 and 18.4.08).


222  19.8.01    a) Decentralisation to a reasonable extent in the day-to-day operations of Radio and Television is necessary.

                        b) The two mass media should constantly strive for a harmonious adjustment between the imperatives of national interest and the varied needs and aspirations of the States and their inhabitants.(Para 19.3.02)

223.  19.8.02   The directive contained in Article 351 should be pursued with imagination, vision and tact by the Union Government. The Hindi language used in broadcasts over the media should be enriched by assimilating common words from Hindustani and the other languages referred to in the Article, so that all people gradually get used to a uniform vocabulary at least for certain common terms all over the country. Steps towards such enrichment of Hindi should be taken on a high priority basis. (para 19.4.05)

224.  19.8.03 The purpose of promoting national integration can only be served through programmes of national importance conveyed in the local languages. (paras 19.6.03 & 19.6.09).

225.  19.8.04   In each region, radio programmes are transmitted by the All India Radio in the local language as also in English and in the other languages of the region. The proposed inter-linking of all radio stations through the INSAT link will enable All India Radio to broadcast programmes of one station to other stations. It is necessary that such linking of radio stations should be made fully operational as quickly as possible. (paras 19.5.01 & 19.5.04).

226.  19.8.05   During the Seventh Five Year Plan, Doordarshan proposes to set up, in each state capital a programme production centre and to link the Centre to the transmitters in the State through microwave circuits or satellites. While implementing this scheme, the highest priority may be accorded to setting up such Centres and linking regional broadcasts from each State capital with those areas in the State which suffer from the maximum handicap in understanding Hindi and English broadcasts. (paras 19.6.04 & 19.6.05).

227.  19.8.06 (a) Every Programme Production Centre should produce sufficient software in the language of the region so as to occupy all the time except that which may be reasonably required for English and Hindi broadcasts. Software development should give special attention to propagation in regional languages of ideas of national integrity and unity.

(b) Early arrangements may be made for the translation of national news broadcasts into regional languages or for the dubbing of such news in regional languages, as may be appropriate, and for simultaneous translation/dubbing and transmission.(Para 19.6.07)

228.  19.8.07 Earmarking of a particular time period for the national programme in English and Hindi should not be uniformally rigid. It should be left to each Station/Kendra to take into account the prime times for the urban and the rural areas falling within its broadcasting range and to decide which programmes should be transmitted and at what time. (para 19.6.10).

229.  19.8.08 It has been proposed that during the Seventh Five Year Plan mobile field units should transmit to broadcasting stations the material required for general broadcasts. This mode of coverage should be extended to news of interest to rural viewers including news on rural development. (para 19.6.11).

230.  19.8.09 The existing restrictions on the broadcasts to be made over the All India Radio and the authority given to the Station Directors to ensure that a proposed broadcast does not contain prohibited items are essential in the larger national interest and should therefore continue. (para 19.7.02).

231.  19.8.10 The Inter-Governmental Council recommended to be established under Article 263, may consider whether any relaxation of the existing Ground Rules for political use of the broadcasting system should be allowed, and, if so, under what conditions. (para 19.7.03)

232.  19.8.11   If a State Government has serious complaints about the use of the media, it can approach the Inter-Governmental Council proposed in Chapter IX. (para 19.7.08).

233.  19.8.12 (a) A Programme Advisory Committee is attached to each All India Radio Station or a Doordarshan Kendra which originates programmes for a duration of not less than five and a half hours every day. A non-political competent non-official may be made Chairman and the Director in charge of the Station or Kendra may be made Deputy Chairman of such a Committee.

                        (b) All broadcasting stations should have their own programme Advisory Committees.

                        (c) A specific rule may be introduced that the State Government concerned should be consulted in the selection of non-official members and Chairman of the Programme Advisory Committees in the State. (paras 19.7.04 to 19.7.09).


234.  20.1.31 The command of Article 351 is that, in the process of developing Hindi, it is neither desirable nor necessary to replace commonly understood terms by difficult sanskritised words. The growth of the official language can best be fostered by following the command of Article 351 both in letter and in spirit. It would be against the mandate of the Constitution, if, in the process of developing the Official Language, the forms, styles and expressions of the various regional languages of India, including, English, which have become assimilated in Hindustani are sought to be discarded. (paras 20.1.16, 20.1.17 & 21.1.18).

235.  20.1.32 Service under the Union and State Governments is an important avenue for employment for the educated classes in India. Proficiency in a particular language need not be insisted upon at the time of recruitment to ensure that language is not used as a factor to create difficulties in recruitment or subsequent career in services. A person selected for a job usually acquires requisite knowledge of the language in the course of his work. In this, he can be assisted by imparting suitable instruction and inservice training. (para 20.1.19).

236.  20.1.33 The work of the Government, both Union and States, which involves or affects the local people must be carried on in the local language. This is even more important in a welfare State. It is necessary that all forms, applications, letters, bills notices, etc. are available in the local language as well as the official language. This is of equal relevance to State Governments which have sizeable linguistic minorities concentrated in certain areas. (para 20.1.20)

237.  20.1.34 Effective steps should be taken to implement the three language formula in its true spirit uniformly in all states in the interests of unity and integrity of the country. (para 20.1.21)

238.  20.1.35 The code of conduct evolved to safeguard the interests of linguistic minorities must be strictly implemented. It is a matter of concern that the post of the Commissioner for Linguistic Minorities has been allowed to remain vacant for a long time. This situation needs to be rectified. (paras 20.1.23 and 20.1.24).

239.  20.1.36 The agreement at the Chief Ministers' Conference that, wherever there are a certain number of students having a common mother tongue in a school, a teacher of that language should be provided, is not being compiled with in many places on grounds of non-availability of teachers and financial stringency. The Union Government should consider providing financial assistance and/or maintaining a pool of language teachers to alleviate these difficulties. The Finance Commission should, while recommending fiscal assistance, keep this responsibility of the States in view. (para 20.1.25).

240.  20.1.37   Politicisation of language has often tended to threaten the unity and integrity of the country. There is need for creating appropriate forum at various levels not only to defuse any potentially explosive situation but also for evolving a positive approach. The Inter-Governmental Council and the Zonal Councils can play a very useful role in this connection. (para 20.1.26).

241.  20.1.38 (i) There is a strong case for renaming the Committee of Parliament on official language and the Department of Official language of the Home Ministry and the Directorate General of Hindi or the Ministry of Human Resource Development as Committee of Parliament on Official and Scheduled Languages, Department of Official and Scheduled Languages and Directorate General of Three-Language Programme, respectively with a clear mandate to take measures which would promote enrichment of all these languages.

(ii) The objective of enrichment of all the languages would be considerably helped if some popular books of high quality in different scheduled language are printed in Devanagari (and/or Roman) scripts with the original text on one page and its translation in Hindi (and/or English) on the page facing it. (para 20.1.29).


242.  20.2.21 All matters which need to be sorted out between the Union Government and a Union Territory with Legislature may be discussed by a Standing Committee for the Union Territory. The Committee may have the Union Home Minister as Chairman and the Lt. Governor and Chief Minister of the Union Territory as members when a matter concerning a Union Ministry other than the Ministry of Home Affairs comes up before the Committee, the Union Minister concerned may be co-opted. (para 20.2.19).

243.  20.2.22   The Standing Committee for Union Territory may deal with matters which can appropriately be discussed either in the Zonal Council or in the National Economic and Development Council. (para 20.2.20).


244.  20.3.18 Article 217 may be amended by inserting in it a clause as under:-

"IA. The President may after consultation with the Chief Justice of India, make rules for giving effect to the provisions of clause (1) of the Article, and in order to ensure that vacancies in the posts of Judges in the High Courts are promptly filled in, these rules may prescribe a time-schedule within which the various functionaries having consultative role in the appointment of judges under this Article, shall complete their part of the process. (para 20.3.13).

245.  20.3.19 The healthy convention that as a principle High Court Judges are not transferred excepting with their consent should continue to be observed. (para 20.3.16).

246.  20.3.20   Advice given by the Chief Justice of India regarding a proposal to transfer a judge, after taking into account the latter's reaction and the difficulties, if any, should, as a rule of prudence, be invariably accepted by the President and seldom departed from.

247.  20.3.21   As a matter of healthy practice, the Chief Justice of India should before formulating an opinion in his individual judgement as to the proposed transfer of a judge from one High Court to another, take into confidence two senior judges of the Supreme Court and ascertain their views. (paras 20.3.17)



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