In a recent judgement, the Karnataka High Court upheld the disqualification of five independent MLAs from the Assembly. These MLAs, who had previously served as Ministers in the Yeddyurappa government, were disqualified along with 11 others after they withdrew their support to the government. The disqualifications raise some important questions on the working of the anti-defection law. While the law was framed in 1985 with the specific intent of 'combating the evil of political defections', over the years several unanticipated consequences have come to the fore. The primary among these is the erosion of independence of the average legislator. The need for an anti-defection law was first felt in the late 1960s. Of the 16 States that went to polls in 1967, Congress lost majority in eight and failed to form the government in seven. Thus began the era of common minimum programmes and coalition governments. This was accompanied with another development - the phenomenon of large scale political migrations. Within a brief span of 4 years (1967-71), there were 142 defections in Parliament and 1969 defections in State Assemblies across the country. Thirty-two governments collapsed and 212 defectors were rewarded with ministerial positions. Haryana was the first State where a Congress ministry was toppled. The Bhagwat Dayal ministry was defeated in the Assembly when its nominee for speakership lost out to another candidate. Congress dissidents defected to form a new party called the Haryana Congress, entered into an alliance with the opposition and formed a new government under the Chief Ministership of Rao Birender Singh (also a Congress defector). Haryana thus became the first State to reward a defector with Chief Ministership. Another Haryana legislator, Gaya Lal, defected thrice within a fortnight. The now well know terms 'Aya Ram' and 'Gaya Ram' that are often used to describe political turncoats owe inspiration to him. It was to address this issue that the anti-defection law was passed in 1985. This law amended the Constitution and added the Tenth Schedule to the same. The Supreme Court, in Kihota Hollohon vs. Zachilhu (1992), while upholding the validity of the law held that decisions of disqualification shall be open to judicial review. It also made some observations on Section 2(1) (b) of the Tenth schedule. Section 2(1) (b) reads that a member shall be disqualified if he votes or abstains from voting contrary to any direction issued by the political party. The judgement highlighted the need to limit disqualifications to votes crucial to the existence of the government and to matters integral to the electoral programme of the party, so as not to 'unduly impinge' on the freedom of speech of members. This anti-defection law has regulated parliamentary behaviour for over 25 years now. Though it has the advantage of providing stability to governments and ensuring loyalty to party manifestos, it reduces the accountability of the government to Parliament and curbs dissent against party policies. In this context, Manish Tewari's private member bill merits mention: he suggests that anti-defection law be restricted to votes of confidence and money bills. Such a move will retain the objective of maintaining the stability of the government while allowing MPs to vote freely (subject to the discipline of the party whip) on other issues. This brings us to the question - Is the anti-defection law indispensable? Is defection peculiar to India? If not, how do other countries handle similar situations? It is interesting to note that many advanced democracies face similar problems but haven't enacted any such laws to regulate legislators. Prominent cases in UK politics include the defection of Ramsay Macdonald, the first Labour Prime Minister, in 1931. He defected from his party following disagreements on policy responses to the economic crisis. Neither Macdonald nor any of his three cabinet colleagues who defected with him resigned their seats in the House of Commons to seek a fresh mandate. Australian Parliament too has had its share of defections. Legislators have often shifted loyalties and governments have been formed and toppled in quick succession. In the US too, Congressmen often vote against the party programme on important issues without actually defecting from the party. India might have its peculiar circumstances that merit different policies. But, the very fact that some other democracies can function without such a law should get us thinking. Sources/ Notes: [1] PRS Conference note: The Anti-Defection Law – Intent and Impact [2] Column by CV Madhukar (Director, PRS) titled 'Post-independents' in the Indian Express
In November 2017, the 15th Finance Commission (Chair: Mr N. K. Singh) was constituted to give recommendations on the transfer of resources from the centre to states for the five year period between 2020-25. In recent times, there has been some discussion around the role and mandate of the Commission. In this context, we explain the role of the Finance Commission.
What is the Finance Commission?
The Finance Commission is a constitutional body formed every five years to give suggestions on centre-state financial relations. Each Finance Commission is required to make recommendations on: (i) sharing of central taxes with states, (ii) distribution of central grants to states, (iii) measures to improve the finances of states to supplement the resources of panchayats and municipalities, and (iv) any other matter referred to it.
Composition of transfers: The central taxes devolved to states are untied funds, and states can spend them according to their discretion. Over the years, tax devolved to states has constituted over 80% of the total central transfers to states (Figure 1). The centre also provides grants to states and local bodies which must be used for specified purposes. These grants have ranged between 12% to 19% of the total transfers.
Over the years the core mandate of the Commission has remained unchanged, though it has been given the additional responsibility of examining various issues. For instance, the 12th Finance Commission evaluated the fiscal position of states and offered relief to those that enacted their Fiscal Responsibility and Budget Management laws. The 13th and the 14th Finance Commissionassessed the impact of GST on the economy. The 13th Finance Commission also incentivised states to increase forest cover by providing additional grants.
15th Finance Commission: The 15th Finance Commission constituted in November 2017 will recommend central transfers to states. It has also been mandated to: (i) review the impact of the 14th Finance Commission recommendations on the fiscal position of the centre; (ii) review the debt level of the centre and states, and recommend a roadmap; (iii) study the impact of GST on the economy; and (iv) recommend performance-based incentives for states based on their efforts to control population, promote ease of doing business, and control expenditure on populist measures, among others.
Why is there a need for a Finance Commission?
The Indian federal system allows for the division of power and responsibilities between the centre and states. Correspondingly, the taxation powers are also broadly divided between the centre and states (Table 1). State legislatures may devolve some of their taxation powers to local bodies.
The centre collects majority of the tax revenue as it enjoys scale economies in the collection of certain taxes. States have the responsibility of delivering public goods in their areas due to their proximity to local issues and needs.
Sometimes, this leads to states incurring expenditures higher than the revenue generated by them. Further, due to vast regional disparities some states are unable to raise adequate resources as compared to others. To address these imbalances, the Finance Commission recommends the extent of central funds to be shared with states. Prior to 2000, only revenue income tax and union excise duty on certain goods was shared by the centre with states. A Constitution amendment in 2000 allowed for all central taxes to be shared with states.
Several other federal countries, such as Pakistan, Malaysia, and Australia have similar bodies which recommend the manner in which central funds will be shared with states.
Tax devolution to states
The 14th Finance Commission considerably increased the devolution of taxes from the centre to states from 32% to 42%. The Commission had recommended that tax devolution should be the primary source of transfer of funds to states. This would increase the flow of unconditional transfers and give states more flexibility in their spending.
The share in central taxes is distributed among states based on a formula. Previous Finance Commissions have considered various factors to determine the criteria such as the population and income needs of states, their area and infrastructure, etc. Further, the weightage assigned to each criterion has varied with each Finance Commission.
The criteria used by the 11th to 14thFinance Commissions are given in Table 2, along with the weight assigned to them. State level details of the criteria used by the 14th Finance Commission are given in Table 3.
Grants-in-Aid
Besides the taxes devolved to states, another source of transfers from the centre to states is grants-in-aid. As per the recommendations of the 14th Finance Commission, grants-in-aid constitute 12% of the central transfers to states. The 14th Finance Commission had recommended grants to states for three purposes: (i) disaster relief, (ii) local bodies, and (iii) revenue deficit.
