Editorial: Setting states free

Apr 24 2014, 02:57 IST
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SummaryThat has to be the test of a Modi prime ministership

Much has been heard about Modi’s PM-CM partnership, were he to become PM, but what will be the components of this? One is the optics, so instead of the states coming to the Planning Commission every year for Plan funds, the Planning Commission can be asked to go to them, much the same way the Finance Commission does anyway. Meetings of the National Development Council can be held more frequently, possibly in state capitals, and more detailed interactions can be held with chief ministers—and among bureaucrats—to iron out troubling issues.

Former NDA disinvestment and telecom minister Arun Shourie has, in an interview to FE, outlined valuable suggestions. Even progressive states, he says, cannot change their labour laws since, as they are on the concurrent list, the Centre needs to amend its law first—there are many more such laws. But, says Shourie, section 2 of Article 254 of the Constitution allows a state to change its laws even without the Central law changing, subject to one proviso—that the President give his assent. Since this effectively means the Centre only needs to okay the change, this can be a big tool in Modi’s hands to both improve Centre-state relations while at the same time, ensuring that progressive states are not held back by the Centre’s inability—just see the composition of the Rajya Sabha—to pass relevant law.

For a decade, NDA chief ministers in particular have cried themselves hoarse over ‘tied aid’ from the Centre which forces them into projects dear to the Centre, not them—they may want to provide piped water while the Centre wants more rural roads. Similarly, between FY01 and FY13, Special Plan Assistance and Special Central Assistance—both have a high degree of Central discretion—have gone up from 5.9% of central assistance to state/UT Plans to 16.5%. Modi is already on record saying he will tackle the ‘tied aid’ complaint—if states don’t want to build more rural roads, he has said, their share of funds will be earmarked for, if they wish, water projects. Were he to become PM, discretionary funds allocation can be reduced. In even the 1972-95 period, work done by Stuti Khemani had shown Plan transfers tended to be 10-30% higher for states run by allies of the Central government—in more recent times, West Bengal, Bihar and UP got more central largesse when they were being wooed. Setting the states free, to be able to reform faster, has to

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