Part I of the post dealt with the major issues that the specific portions of the ordinance raise. This part will solely focus on the large federalism question that the promulgation of this ordinance creates.
THE FEDERALISM QUESTION
The Indian Federalism and Central Government
The Indian constitution is in many ways the grundnorm for the nation’s legal system. It is from the constitution that various functionaries of the Indian state get their powers. Article 246 refers to the Seventh Schedule which consists of three lists- the Union List, State List and Concurrent List explaining the domain of legislative powers of the respective governments. The power of the executive is co-extensive to that of the legislature under Articles 73 and 162 of the Constitution.
Entry 14 in the State List includes agriculture under the jurisdiction of the state governments. Conventionally, this would mean that agriculture should have been a subject in which the central government does not interfere. However, the central government has used and can use various other modes to control agriculture. For instance, under Article 249, the Central government has the power to make laws even on subjects of the State List if deemed them to be “in the national interest” and can be used to convert this ordinance into an Act under the pretence of the urgency created by the pandemic. Additionally, as expounded by Pritam Singh, the Sarkaria Commission had recognised that the Central government has used a combination of Entries 33 and 34 of the Concurrent List which provide for power to legislate regarding “production, trade, supply and distribution” and “price control” respectively to legislate on agricultural issues to invade into the scope of legislating on agriculture, for instance, the Essential Commodities Act, 1955.
While it is true that India has a quasi-federal structure with the central government being more powerful than the state governments, there has to be a constructive collaboration between the different levels of government, at least in times of crisis. This ordinance is one of the many policies of the central government under the “Aatmanirbhar Bharat Abhiyan” to boost India’s economic sector during the COVID-19 pandemic. It has been argued in an editorial article of the Economic and Political Weekly, that this was a time to fully utilise the constitutional cooperation mechanism. This cooperation is especially important since any plan of action will include the leadership of the central government and the on-the-ground support of the state governments. However, the actual practice of the union government has a strong centralisation inclination.
This trend has also been observed by Pankhuri Agrawal. She observed how the central government made rules regarding lockdown and quarantining without any consultation with the state government, which is in violation of Section 11 of the Disaster Management Act and the basic essence of a Schedule VII as both, the home and public health departments are under the state list of subjects. This was done by nullifying the authority of the state governments, while at the same time putting the pressure of implementation on them. This gets more difficult when we discuss how while the states are strapped for cash, they are expected to bear the lion’s share of expenditure for the policies of the central government.
Issues of Fiscal Federalism and the Fund Crunch of Indian States
Section 6 of the Ordinance provides that no tax, cess or levy shall be applied on the transactions between farmers and traders by any state government. This can be viewed as a further attack on the independence and relative autonomy of state governments. The central government seems to continuously be working to concentrate all the revenue in its coffers and leave the state governments heavily dependent on the central government for funds. The State of Punjab alone collected INR 3600 crores as revenue from trade fees in the year 2019-20 which it is about to lose. The impact of this loss of source of revenue is also likely to be felt by the farmers as this will lead to a scarcity of funds for the development of mandis and other facilities for them.
States are already going through a financial crunch because of the dues that the Central government is yet to transfer the State’s share of GST collected. It should also be noted that although the Central government has increased the overall taxation percentage, a significant amount of it is being collected as cesses and surcharges, which need not be shared with the state governments.
The central government is yet to clear the dues of the state government’s portion of the GST which it has collected since April. The central government has also delayed the payment of the state’s shares of land tax that it collected. With the aforementioned trend it is an extremely problematic step as it further reduces revenue sources for the state governments. Additionally, the revenue collection has gone considerably down because of the obstacles in manufacturing and distribution of goods and services due to COVID-19. The impact of this will be most felt by the state governments since they are largely dependent on the central government for the collection and disbursement of tax collections. The reduced tax collection is likely to compel the states to negotiate and demand harder for the clearance of their dues.
It is clear that the Ordinance is operating in a grey area of law and is most likely to be strongly contested in the courts and political corridors of India, especially by farmer organisations and state governments. Regardless of what the outcome is, of these legal contestations on the national level, the immediate impact of the provisions of the Ordinance will continue to burden the already over-burdened Indian farmer as discussed in Part I. The central government has via Sections 17, 18 and 19 of the Ordinance further conferred upon itself, wide powers to change and overrule the state laws dealing with this issue. This is a serious stretching of the federal elastic of the Indian polity, and is very close to breaking point. A lot of the questions and worries expressed in the sections above will hopefully be answered by the rules and regulations on the Ordinance’s implementation that the central government might eventually notify. However, what is more imperative is to ensure that the farmers are kept aware about their rights in these open markets.
Every effective law is based on public discourse, and the fact that this Ordinance was ushered in without sufficient consultations with key stakeholders is a major contributor to the unpopularity of the Ordinance The farmers and unions are protesting vehemently, but even the best case scenario seems to be that this Ordinance will not be converted into an Act. However, this appears to be unlikely considering the overwhelming majority that the ruling government enjoys in the Parliament. It is imperative that with the increasing privatisation of the Indian economy, the process is also accompanied by a protective attitude of the government to ensure that the vulnerable sections, in this case- the farmers, are not put in a disadvantageous position vis-à-vis private trader and money-lenders. Any subsequent pressure on the farmers will lead to a further decline in production which has multiple repercussions for the already sluggish Indian economy.