In 'act of god', coercive not cooperative federalism

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 In 'act of god', coercive not cooperative federalism

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• Centre’s refusal: Centre is going back on its promise of paying compensation to States when States are already facing financial and governance problems due to covid-19. The Centre has called the financial crisis an “act of God”. Constitution of India lays down provisions for cooperation and coordination between Centre and States which are equal representatives of the people of India. Government’s refusal to pay, adversely affects the Centre-State relationship. 
• Centre’s commitment formed the basis of GST: Centre’s commitment to pay the losses in case States faced revenue deficit was a key part of the agreement between the Centre and the States when GST came into effect in 2017. States gave up a significant portion of gross tax revenues for “one nation, one tax”.  
• Legal accountability: When collections under the cess exceeded compensation demand in the first two years, the Centre absorbed the surplus. Now when the cess collections have fallen short, the Centre is not even exploring viable options but is instead asking if it’s legally accountable to pay the compensation. 
• History of the commitment to pay compensation: The commitment goes back to the UPA times when BJP-ruled States demanded that compensation mechanism be a part of the Constitution. The Centre had assured payment of compensation in case of losses. 
• Assurances: When GST compensation cess was introduced, many States had raised the concern that the cess may not be sufficient to meet shortfall. The Centre had assured that it would provide funds. In the seventh meeting of the GST council, Finance Minister Arun Jaitley had affirmed that payment was a constitutional commitment. This assurance was also given in the eighth meeting. In the tenth meeting, the council confirmed that Centre would access other funds to pay the compensation which would be recouped after five years. 
• No ambiguity: After so many assurances, the States never thought the Centre would default. The constitutional framework doesn’t provide an ‘Act of God’ escape clause. Both the options now presented by the Centre ask States to mortgage their future to sustain the present. Cooperative federalism has become coercive federalism.
• Centre has more means and should borrow, not States: Monetary measures are controlled by the Centre. Borrowing is also more efficient and less expensive if done by the Centre. 
• Centre has more resources: a) The Fourteenth Finance Commission allotted 42% of central government tax revenues to States. But during 2015-2019, States received only 39%. b) Centre’s revenue from cesses and surcharges through 2019-20 is estimated to be Rs. 3,69,111 cr. This revenue is not shared with States. c) Centre-State petroleum tax revenue ratio in 2019-20 was 60%-40%. It was 50%-50% in 2013-14.
• Summary: Centre and States are equal representatives of the federal republic of India. Upholding the cooperative relationship requires empathy on the part of the Centre when States are facing challenges due to the pandemic and the lockdown which was announced without consulting the States. Instead, the Centre is adding to the State burden by refusing to pay GST compensation and asking the States to borrow. Cooperative federalism has become coercive federalism. 

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