Center-State relations means the relations between Center and it's units where there exist Federal System. It is of great importance in a country like India constrained by regionalism, religion, uneven development, demand for autonomy, identity politics, competing political interests, caste and race. Gopal Krishna Gokhale was the first person who proposed for devolution of financial authority among Provinces under Decentralisation Commission in 1908.
In January 1947, Union Powers Committee (Nehru as Chairman) submitted its first report on April 17, 1947, outlining the scheme of distribution of powers between the Union Govt. and the provinces. The Govt. of India Act 1935 proposed to set up a federal polity in India, with a central government and the Provinces deriving their jurisdiction and powers by direct devolution from the Crown. Article 1 of Indian Constitution describes India as a “Union of State”. In the Constitution, the classification of Centre-State relation is inside the Three Points-
1-Legislative Relations Article 245 to 255 contain a charter of the distribution of legislative powers between the Union and the States. There are three types of lists in the Seventh Schedule of constitution; i.e. Union List (eg. Security, war, Citizenship, post, finance), State List (eg. Law and order, justice, Jail, Police, Irrigation, Health) and Concurrent List (eg. Education, Marriges, penal code, Criminal and Civil) consisting of 97, 66 and 47 items respectively. Union Parliament have jurisdiction to make laws in regard to items in the Union List.
The State legislation has exclusive powers power to make laws in respect of items in the State List. On the matter of Concurrent List both Union and State legislatures could legislate on its Items. State Govt. can not legislate on the subjects of Union Govt. but Union can make laws on State subjects in certain Circumstances. Like, If the subject of State list is National Interest OR If the state legislature wants the interference of Union OR on the failure of State Govt. machinery OR on the time of Emergency.
2-Administrative Relations Article 256 to 263, seek to regulate administrative relations between the Union and the States. In the other words Union controlled the administrative system of the States. The Indian Constitution is based on the principle that the executive power is co-extensive with legislative power, which means that the Union executive/the state executive can deal with all matters on which Parliament/state legislature can legislate.
The executive power over subjects in the Concurrent list is also exercised by the states unless the Union government decides to do so. The Centre can issue directives to the state to ensure compliance with the laws made by Parliament for construction and maintenance of the means of communications declared to be of national or military importance, on the measures to be adopted for protection of the railways, for the welfare of the scheduled tribes and for providing facilities for instruction in mother tongue at primary stage to linguistic minorities.
The Centre acquires control over states through All India Services, grants- in- aid and the fact that the Parliament can alone adjudicate in inter- state river disputes. During a proclamation of national emergency as well as emergency due to the failure of constitutional machinery in a state the Union government assumes all the executive powers of the state. The top official of state i.e. IAS and IPS, appointed by Centre Govt.
3-Financial Relation Both the Union government and the states have been provided with independent sources of revenue by the Constitution. Parliament can levy taxes on the subjects included in the Union list (Income Tax, Agriculture Taxes, Export duty, Production tax, Custom Duty). The states can levy taxes on the subjects in the State list (Land, House, Sales, Vehicle, House tax). Ordinarily, there are no taxes on the subjects in the Concurrent List.
The Centre can exercise control over state finances through the Comptroller and Auditor General of India and grants. But during Financial emergency the President has the power to suspend the provision regarding division of taxes between the centre and the states. Centre provides the states various types of Grants-in-aid and Loans.
Finance Commission One of the instruments which the Constitution has evolved for the purpose of distributing financial resources between the Centre and the states is the Finance Commission. The Finance Commission according to Article 280 of the Constitution is constituted by the President once every five year and is a high- power body.
The duty of the Commission is to make recommendations to the President as to: (a) the distribution between the union and the states of the net proceeds of the taxes which are to be divided between them and the allocation between the states themselves of the respective share of such proceeds; (b) the principles which should govern the grants-in-aid of the revenues amongst the states out of the Consolidated Fund of India. At present the 13th Finance commission is working. The Chairman of 13th Finance commission is Vijay L Kelkar.
Sarkaria Commission was set up in March 1983 by the central government of India. The Commission was so named as it was headed by Justice Rajinder Singh Sarkaria, a retired judge of the Supreme Court of India. The other two members of the committee were Shri B Sivaraman and Dr SR Sen. The Sarkaria Commission's charter was to examine the relationship and balance of power between state and Central governments and suggest changes within the framework of Constitution of India.
The Commission after conducting several studies, eliciting information, holding discussions and after detailed deliberations submitted its 1600 page final report in January 1988. The final report contained 247 specific recommendations. The important recommendations are as follows:-
•There should be formed an Inter-State Council (according to article 263) to solve the Center State Problems. •States should given the right to amend the Laws regarding State List. •Discussion between State and Centre should be compulsory on making laws regarding Concurrent List. •There should be distribution of Income and Production taxes.