Baba’s Explainer – Uncooperative Federalism

• There are two or more levels (or tiers) of government.
• Different tiers of government govern the same citizens, but each tier has its own jurisdiction in specific matters of legislation, taxation and administration.
• The jurisdictions of the respective levels or tiers of government are specified in the constitution. So the existence and authority of each tier of government is Constitutionally guaranteed.
• The fundamental provisions of the constitution cannot be unilaterally changed by one level of government. Such changes require the consent of both the levels of government.
• Courts have the power to interpret the constitution and the powers of different levels of government. The highest court acts as an umpire if disputes arise between different levels of government in the exercise of their respective powers.
• Sources of revenue for each level of government are clearly specified to ensure its financial autonomy.
• The federal system thus has dual objectives: to safeguard and promote unity of the country, while at the same time accommodate regional diversity. Therefore, two aspects are crucial for the institutions and practice of federalism.
• Governments at different levels should agree to some rules of power-sharing. They should also trust that each would abide by its part of the agreement. An ideal federal system has both aspects: mutual trust and agreement to live together.

• In Cooperative federalism the Centre and states share a horizontal relationship, where they “cooperate” in the larger public interest.
• It is an important tool to enable states’ participation in the formulation and implementation of national policies.
• Union and the states are constitutionally obliged to cooperate with each other on the matters specified in Schedule VII of the constitution.
• The essence of co-operative federalism is that the Centre and the State Governments should be guided by the broader national concerns of using the available resources for the benefit of the people.
• Co-operative federalism encourages the Government at different levels to take advantage of a large national market, diverse and rich natural resources and the potential of human capabilities in all parts of the country and from all sections of the society for building a prosperous nation.
• Co-operative federalism makes it possible to raise all the available resources by the Government at different levels in a co-ordinated way and channel them for use for the common good of the people. This requires a harmonious relationship and co-operative spirit between the Centre and the States and among the States themselves.
• Co-operative federalism is intended to ensure a minimum bundle of basic services and a nationally acceptable level of living for all the people of the country.

• In competitive federalism, the States share a vertical relationship with the Central government while competing amongst themselves.
• Essentially, States individually work towards attracting funds and investment to aid their developmental activities. This leads to the formation of a free market scenario amongst the States wherein they play the role of the sellers and the investors become the buyers.
• A type of Competitive federalism is seen in India where states want more funds and perks from the Central government for growth.
• Competitive federalism follows the concept bottom-up approach as it will bring the change from the states. It ensures inclusive development in the country.
• It instils a spirit of positive competition and help utilization of successful models of development across many states. Thus, it helps in reducing inter-states and intra-states inequalities through development.
• The policy of one-size-fit-all is replaced with different policies of various states based on the own priorities with in the state. Each state will design their own policies for development of the cities with self-fund. The concept also promotes discipline among the states.

• The Supreme Court was deciding upon the validity of two Union Government notifications by which Indian importers were to be charged Integrated Goods and Services Tax (‘IGST’) under the reverse charge mechanism, when ocean freight was paid by foreign sellers to foreign shipping lines.
• Earlier, the Gujarat High Court, when faced with this question, decided that these notifications which levied IGST on the ocean freight component in a CIF (cost, insurance and freight) contract amounted to double taxation, and thereby were unconstitutional.
• However, Union government appealed against this verdict before the Supreme Court. It argued that the said notifications were brought upon the “recommendations” of the GST Council, and that non-observance of the same would upset the constitutional architecture.
  • These “recommendations” of the GST Council, according to Article 279A, as per Union government submission, would be binding upon the Parliament and state legislatures on account of it being the ultimate body for making policy decisions on GST.
• The Supreme Court, while upholding the Gujarat High Court judgement, struck down the two government notifications.
• SC ruled that the GST Council recommendations are not binding on the Centre and the states. It held that held the Parliament intended that the recommendations of the GST Council will have persuasive value.
• SC noted that there would have been express provision in Constitution if GST Council recommendations were meant to be binding
• On a theoretical level, the court observed that “contestation”, as opposed to “collaborative discussions”, can also be helpful in fostering Federalism.
• While cooperation and collaboration have been generally considered to be furthering the causes of federalism and democracy, some form of non-cooperation by states can also produce the same results.
• In cases where states have been vested with unequal powers, the political contestation becomes even more relevant.
• In light of the equal powers granted to Parliament and state legislatures, and the non-mandatory nature of its recommendations, the GST Council serves not only as an instrument for exercising “cooperative federalism” but also for expressing differing political viewpoints on policy matters. Hence, federalism need not necessarily be “cooperative” or “collaborative”, but can also be “uncooperative”

• The Supreme Court used scholarship by American law professors Jessica Bulman-Pozen and Heather K. Gerken for invoking uncooperative federalism. They point out alternatives to the two dominant conceptions of imagining Centre-state relations.
  • One views states as ‘autonomous policymakers’ that subsequently act as ‘potential rivals and challengers’ to the central government (Competitive Federalism)
  • Another views states as ‘supportive insiders’, carrying out the mandates of the central government in the capacity of ‘servants and allies’. (Cooperative Federalism)
• IN the concept of Uncooperative Federalism, states can act as legitimate challengers to the Union Government even in the capacity of supportive insiders by methods like exercising licensed dissent, using regulatory gaps, and expressing civil disobedience in the forms of passing resolutions, among other things.
• Simply speaking, federalism can also be imagined in a sphere where states, when vested with lesser powers, challenge the mandates of the central government by using certain legitimate methods.
  • GST Council, as a platform, tilts the balance of power in the favour of the Union Government due to its voting structure, even when the Constitution puts the Union Government and the states on equal footing with respect to taxation.
• The rationale for invoking uncooperative federalism seems to be that when states are not following the recommendations, they are challenging the powers of the Union Government, and this leads to more discussions before reaching a consensus.
• Cooperative federalism (something which the GST Council aspires to promote) may require non-cooperation as much as it may require active cooperation by state units. By this methodology, the Supreme Court interlinks federalism and democracy.
• The recent Supreme Court judgement offers a novel addition to the vocabulary of Indian federalism. Moreover, the Court has also given a positive spin to the term ‘uncooperative federalism’ than has been generally used in the Indian context.

• The controversial Citizenship (Amendment) Act (‘CAA’) of 2019 was followed by massive protests across different parts of the country. So much so, several governments in states and union territories went on to actively oppose the implementation of the CAA and the NRC.
• The governments of Kerala, Punjab, West Bengal, Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana, Andhra Pradesh, Delhi and Puducherry passed resolutions against CAA, NRC
• It is well understood that any progress with respect to the NRC and the NPR has to involve cooperation from state governments. A nationwide NRC cannot be completed without state assistance. This has been used as leverage against the mandates of the Union Government.
• These resolutions send a political message in national fora that certain central initiatives are not acceptable to state governments, and that more work needs to be done before the implementation of such policies.
• When asked, the Supreme Court observed that state governments are well within their rights to pass such resolutions, even though they may not have the force of law.
• This can be considered to be a classic example of uncooperative federalism, where states vested with lesser powers have used certain leverages in order to pose a challenge to the mandates of the union government.

Therefore, different models such as ‘uncooperative federalism’ can stake a claim to the label of federalism as much as the cooperative, collaborative and competitive models of federalism