Water, mines, funds: How states, centre tackle their differences on issues

There are 14 states governed by non-BJP and non-Congress led political alliances, comprising almost half of India’s 30 states and union territories.  

The presence of multiple political parties leads to differences about how to handle economic issues. Some differences are between states, like over land and water, and some with the centre, on fishing rights and drugs.

If prominent issues, say on taxation, are excluded it is still an impressive list of differences. As India’s economy grows, some of these differences could sharpen as others fizzle out. We list some prominent ones.

It is interesting how the central government led by Prime Minister Narendra Modi has responded to them. The Constitution’s Article 263 recommends setting up an Inter State Council, “to support centre-state and inter-state coordination and cooperation in India”. The previous United Progressive Alliance (UPA) government instead favoured the mechanism of the National Development Council, which brought all chief ministers under the rubric of the Planning Commission. The BJP government favours the use of Zonal Councils that club states into five contiguous zones. Since the BJP-led National Democratic Alliance government came to power in 2014, these Councils have met 20 times. That’s impressive considering they met only six times between 2006 and 2013.

Water

The central government recognises that the sharing of rivers—an issue of water rights—is a “complex problem”. In at least two Zonal Council meetings chaired by Home Minister Amit Shah, the topic of sharing river water was discussed among member states. According to a government press release, Shah “asked the concerned states to take a cordial approach to the issue and find a time bound solution”. He was speaking at the Northern Zonal Council meeting, whereas water is a political hot potato in South India. River water is on the central list of subjects drawing the centre into the controversy.

The flashpoint in North India is the Sutlej Yamuna Link Canal. Punjab is unwilling to divert more water from the Sutlej, while Haryana is keen to get some of the flow. The issue also involves Delhi, which depends on the Yamuna. The problem has taken an interesting turn, since the Aam Aadmi Party (AAP) governs Punjab and Delhi and BJP is in power in Haryana.

In the South, sharing river waters is an issue between BJP-ruled Karnataka and DMK-ruled Tamil Nadu, and between Andhra Pradesh (governed by YSR Congress Party) and Telangana (TRS). There are independent panels for the disputes: the Cauvery Water Management Authority and the Krishna River Management Board. The former is almost as old as independent India, the latter is more recent. But the challenges are becoming more acute.

Fishing

Fish don’t recognise boundaries, so fishermen chase them across the seas. In Tamil Nadu and now in West Bengal, fishermen have strayed across national boundaries.  

Off the Tamil Nadu waters, these fishermen (still largely men) have been repeatedly picked up by the Sri Lankan navy. Same happens in Bangladesh waters.

The states want the Centre to intercede. One option for the Centre and the states is to give fishermen identity cards. As of now there is no established protocol for those cards to be recognised by the Sri Lankan or Bangladesh governments. The Indian Coast Guard too is not able to verify if the cards shown by returning fishermen are genuine. It raises the issue of illegal migration.

A likely solution is issuing QR code-enabled PVC Aadhar cards to fishermen. This will need the support of DMK-ruled Tamil Nadu and TMC-ruled West Bengal to support the use of Aadhaar.

In meetings of the South Zonal Council this issue was a top priority this year. A press release said Shah “urged the coastal states to make efforts to ensure that 100 percent of the fishermen including migrant and seasonal fishermen going to the high seas should have such Aadhaar cards that can be easily verified”.

Royalty on mines

The payment of royalties is bone of contention between the centre and many states, particularly those in the mineral rich East India. The rule is that the centre will set the rates for each major mineral and the state government will collect those from miners. The exceptions are for mining coal, oil and gas. Coal royalty is collected by the centre and handed to states. In oil and gas, the rates and the receipts are of the centre.

Royalty for most minerals is charged on an ad valorem basis as a percentage of the price notified by the state government. For stone and sand, states set and collect the rates.

There have been two types of tussle between the centre and the states about royalty. Royalty can be increased only once every three years, so cash-strapped Jharkhand, West Bengal and Odisha keep asking for an early revision of rates. Mining companies have argued that GST cannot be levied on the royalty they pay to states or the centre. The Supreme Court has issued a stay on the tax matter.

The other issue is what led the Enforcement Directorate to the house of Jharkhand chief minister Hemant Soren. The federal agency has allegedly accused Soren of diverting the royalty due from stone mining from the state treasury to his Jharkhand Mukti Morcha party. The charges have come at time when Jharkhand, which has India’s largest coal reserves, is gearing up to impose a transition tax on coal. This is a new flashpoint, as it has to be decided if states have the power to impose such a tax.

Direct Benefit Transfer

For non-BJP ruled states the centre’s decision to withdraw most centrally sponsored schemes (CSS) seemed an opportunity to expand their allocation powers from their budgets. This has not happened.

The Centre has instead changed how money flows through the utilisation pipeline. First, it has pushed the allocation of money in the remaining CSS to the people directly through Direct Benefit Transfer (DBT). This means the money goes to beneficiaries through their bank accounts, bypassing state treasuries. Second, even where an allocation is made to states, to ensure that money does not remain parked with the state or local government the centre has introduced the Single Nodal Agency (SNA) last financial year.

SNA will reduce the float outside the Consolidated Fund of India (CFI). Under the new procedure, each CSS is to be implemented by an SNA account in a scheduled commercial bank. Down the line, implementing agencies use zero balance accounts to draw funds from this SNA account. This is the first full year when the system is in operation and it has forced the states to cough up their share of funds as early as the first quarter of the year. In all zonal council meetings state governments have called to issue a pressure on their accounts. Home Minister Shah advised them to “push all the beneficiary schemes of the state and central government to reach directly into the account of the beneficiaries through 100 percent DBT”. West Bengal, led by TMC, furiously objected to the financial arrangement. It was also a bone of contention for the erstwhile Maharashtra Vikas Aghadi government.

Recognising the differences, the DBT issue has been flagged as of “national importance” and is likely to be placed before the inter-state council.

Drugs

The use of drugs and the menace of smuggling across the borders is however an area where the states seem to be on the same page as the centre.

It has not always been so. Each state is supposed to set up an Anti-Narcotics Task Force to be headed by an Inspector General (joint secretary) level officer with a five year plan to combat narcotics issues. Most states are nowhere near to setting up those. Punjab, one of the most-affected states, has set up a task force. Maharashtra too has an anti-narcotics force, which was set up in 2005. Between then and 2016, however, the force met only twice. The centre first came up with the plan for such state-level forces in 2004. A status report by the Narcotics Control Bureau (NCB) notes that states are still setting up task forces.

However while at the Centre there is the Narcotics Control Bureau under the ministry of home affairs which chases the trade and production of illicit cannabis and poppy and any other types of drugs as well as the Central Bureau of Narcotics to monitor licit production of poppy and of precursor chemicals used to process them and finally the Department of Revenue Intelligence (DRI) which monitors the trade across borders, data shows it is the state police forces which does 85 per cent of the seizures. But as each state government acknowledges the percentage could be far higher. It is not that the states are starved of their own funds but narcotics seizure is a low priority. The reason why states are anemic about their involvement is the puny size of the central corpus and the difficulty in getting the money. The rules say the states have to prove they lack the infrastructure to catch the criminals and provide a three-year action plan.

One of the alternatives some states have considered is legalising some of the drug usage. Sikkim, which has high drug abuse, has considered legalising prescription drug abuse. It enacted the Sikkim Anti-Drugs Act, 2006 (SADA) that did not jail offenders but imposed a fine of Rs. 10,000. “However, in 2011 SADA was amended to provide for stricter punishments and the fine for illicit drug use was increased from Rs. 10,000 to Rs. 50,000”. In response to objections by civil society, the state has again softened SADA to differentiate between drug paddlers and users, and emphasised rehabilitation.

The NCB acknowledges the impact of this light policing. “According to an assessment by the ministry of social justice, there are approximately 4 million drug addicts in India. 

Testing times

• The interstate council is a creation from Article 263 of the Constitution for solving federal issues
• The UPA government favoured the National Development Council. The BJP government has favoured zonal councils
• Both have only advisory roles since they are not Constitutional bodies
• Zonal councils bring chief minister and chief secretaries of each zone (5) across the table with Union ministers and their teams
• Will be tested with increasing differences on power, pensions and administrative reforms