The Hindu Editorial Analysis
01 April 2021

1 April 2021: The Hindu Editorial Analysis

1) Still no recognition of the third tier

In the FC-15 proposals, the goal of fiscally empowering local governments to deliver territorial equity is still far away   

GS 2: Conditional grants to incentivise the states for reforms


CONTEXT:

Unlike the previous Commissions, the Fifteenth Finance Commission was in the background of the COVID-19 pandemic which reinforced the significance of local governments, gram sabha and other participatory institutions in containing the crisis and delivering social protection in India.

15th Finance Commission

  • The 15th Finance Commission was constituted by the President of India in November 2017, under the chairmanship of NK Singh. Its recommendations will cover a period of five years from April 2020 to March 2025
  • The primary task of the Union Finance Commission is to rectify the vertical and horizontal imbalances in resources and expenditure responsibilities between Union and States, which after the 73rd and 74th Constitutional Amendments includes the third tier of local governments.
  • This Commission is the fifth after the incorporation of Part IX and Part IX-A to the Constitution which mandate the Union Finance Commission to supplement the resources of panchayats and municipalities on the basis of the recommendations of the State Finance Commission (another institution created by the Amendments)

Recommendations of 15th Finance Commission

  • The Fifteenth Finance Commission’s report for the period 2021-22 to 2025-26 outlines some crucial recommendations for state governments.
  • These recommendations cover tax devolution, grants from the Centre, and the guidelines for the borrowings that they are permitted to incur over the medium-term.
  • The commission has recommended that 41 per cent of the government’s divisible pool of taxes be transferred to state governments.

Higher vertical devolution

  • Compared with the 14th Finance Commission there is a 52% increase in the vertical share.
  • 15th  Finance Commission has raised this share to 60% and linked them to drinking water, rainwater harvesting, sanitation and other national priorities in the spirit of cooperative federalism.
  • It reduced the performance-based grant to just ?8,000 crore — and that too for building new cities, leaving out the Panchayati Raj Institutions (PRIs) altogether.

 

 

Entry-level criterion

An important recommendation of the Fifteenth Finance Commission is the entry-level criterion to avail the union local grant (except health grant) by local governments (strictly speaking, it is performance-linked).

  • For panchayats, the condition is online submission of annual accounts for the previous year and audited accounts for the year before
  • For urban local governments, two more conditions are specified
    • After 2021-22, fixation of minimum floor for property tax rates by the relevant State
    • Consistent improvement in the collection of property taxes in tandem with the State’s own Gross State Domestic Product

 

Gram panchayats (especially the affluent and semi-urban categories) are left out from this.

 

Issue in Fiscal Data

  • 11th Finance Commission published the fiscal data of all tiers of panchayats and municipalities in its report. But the data proved defective.
  •  12th Finance Commission did not publish any local fiscal data.
  • 13th Finance Commission published data online and some researchers did use them.
  • 14th Finance Commission conducted a sample survey covering 15% gram panchayats, 30% block panchayats and all district panchayats besides 30% municipalities, presumably to ensure quality in canvassing data. The results too were not published.
  •  Interestingly, neither the Fifteenth Finance Commission nor the earlier counterparts took pains to examine how and where the financial reporting system has failed.

Without reliable data can you ensure good governance?

Equalisation principle

  • The Fifteenth Finance Commission claims that it seeks to achieve the “desirable objective of evenly balancing the union and the states”
  • Fifteenth Finance Commission outlines nine guiding principles as the basis of its recommendation to local governments, there is no integrated approach

Conclusion

Equity is the foundational rationale of a federation. Abandoning tax effort criterion incentivises dependency, inefficiency and non-accountability. In sum, if decentralisation is meant to empower local people, the primary task is to fiscally empower local governments to deliver territorial equity. We are far from this goal.


2) A step that enhances cooperative federalism

                                                       

The amendment to the GNCTD Act defines, without doubt, who represents the ‘Government’ in unique case of Delhi.

 

GS 2: Co-operative Federalism.

Features of NCT of Delhi (Amendment) Bill 2021:

  • The NCT of Delhi (Amendment) Bill mainly aims to amend four clauses of the Government of National Capital Territory of Delhi Act, 1991 (GNCTD Act 1991). They are, 
  • Section 21 – This section deals with the restrictions on laws passed by the Legislative Assembly concerning certain matters.
  • The Bill provides that the term “government” referred to in any law made by the Legislative Assembly will imply Lieutenant Governor (L-G).
  • Section 24 – This section deals with assent to Bills passed by the Legislative Assembly. The L-G will reserve the bills for the consideration of the President in a few matters. It includes bills that diminish the powers of the High Court of Delhi, the President directed the L-G to reserve a bill, etc.
  • The NCT of Delhi (Amendment) Bill requires the L-G to reserve bills for the President that incidentally covers any of the matters outside the purview of the powers of the Legislative Assembly.
  • Section 33- It mentions that the Legislative Assembly will make rules to regulate the procedure and conduct of business in the Assembly.
  • The 2021 NCT bill states that such rules must be consistent with the Rules of Procedure and Conduct of Business in the Lok Sabha.
  • Section 44 – It deals with the conduct of business. Accordingly, all executive decisions taken by the elected government should be under the L-G’s name. 
  • The 2021 bill empowers the L-G to specify his suggestions on certain matters. His opinion has to be taken before making any executive action on decisions of the Minister/ Council of Ministers. 

Background:

  • In 2015, Legislative assembly of Delhi had passed Delhi Netaji Subash University of Technology Bill and sent it to President assent and defined the term ‘Government’ as the ‘Government of the National Capital Territory of Delhi”.
  • In 2017, LG of Delhi returned Delhi Netaji Subash University of Technology Bill 2015 to Legislative assembly of Delhi due to inconsistent definition of the term ‘Government’.
  • Delhi Assembly sent a modified version of the Bill for President’s assent where the definition of ‘Government’ was described as “Lieutenant Governor of NCT Delhi appointed by the President”.

 

Formalises the Definition

  • Aim of amendments were to clear ambiguities in the roles of various stakeholders and provide a constructive rule-based framework for stakeholders within the government of Delhi to work in tandem with the Union Government.

 

Partners not adversaries

  • Union Government by this transformation provides platforms and frameworks to work together.
  • The creation of NITI Aayog, GST Council and accepting the 15th FC recommendations are clear examples of Union Government viewing states as equal partners.

Delhi’s Status

  1. Delhi’s current status as a Union Territory with a Legislative Assembly is an outcome of the 69th Amendment Act. The act introduced Articles 239AA and 239BB in the Constitution.
    • They have created the Union Territory of Delhi with a legislative assembly.
    • Further, the administrator appointed under article 239 gets designated as the Lieutenant Governor. There shall be a council of ministers to aid and advise LG.
    • Lastly, provisions of public order, police and land are not under the jurisdiction of the Delhi government. The Centre will maintain these provisions.
  2. Article 239AA(4) mandates that in case of a difference of opinion between the L-G and the Council of Ministers, the L-G has to refer the issue to the President.
    • Until the decision is pending before the President, the L-G can use his discretion to take immediate action if urgency requires him/her to take an action.
  3. The GNCTD Act 1991 got passed to supplement the constitutional provisions relating to the Assembly and the Council of Ministers in the national capital. The act outlines few important provisions such as: 
    • the powers of the Assembly
    • the discretionary powers enjoyed by the L-G 
    • duties of the Chief Minister with respect to the need to furnish information to the L-G

Importance of Delhi

  • The National capital has
  • Country’s legislature
  • The seat of union Government
  • Judiciary
  • Diplomatic Mission
  • And other institutions of national importance

It deserves smooth functioning and cannot be subject to misadventures arising from the ambiguities in the roles and responsibilities of its stakeholders.

Conclusion

Making Delhi Assembly rules consistent with the rules of the Lok sabha or ensuring that the opinion of the LG is taken can only ensure clarity and foster an environment of co-operation.