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Yojana June 2013
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YOJANA June 2013 1
Our Representatives : Ahmedabad: Amita Maru, Bangalore: B.S. Meenakshi, Chennai: A. Elangovan, Guwahati: Anupoma Das, Hyderabad: S. Dharmapuri, Kolkata: Antara
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No. of Pages : 68
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June 2013 Vol 57
Chief Editor : Rajesh K. Jha
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Rig Veda
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YOJANA June 2013 1
C O N T E N T S
INTEGRATING SUSTAINABILITY INTO INDIAN PLANNING
Ashish Kothari ..................................................................................5
CLIMATE RISK: CRITICAL CHALLENGES
Anil Kumar Gupta...........................................................................11
CHANGING DYNAMICS OF CENTRE-STATE FINANCIAL
RELATIONS
Pravakar Sahoo, Amrita Sarkar ..................... ........................ ..........18
DO YOU KNOW? ........................................................................24
CONSTRUCTING CHANGE BY ADVANCING
ENERGY EFFICIENCY
Radhika Khosla ...............................................................................26
INDIAS URBAN ENVIRONMENTAL CHALLENGES: LAND
USE, SOLID WASTE AND SANITATION
Kala Seetharam Sridhar, Surender Kumar ........................ ..............30
WESTERN GHATS AND WILD LIFE PRESERVATION
P K Sujathan ....................................................................................36
PROBLEMS IN FLOOD-PRONE RIVER BASINSDinesh Kumar Mishra .....................................................................41
BEST PRACTICES
PIPES OF PROSPERITY
Ranjan K Panda...............................................................................46
URBAN BIODIVERSITY :
GROWTH AND DEVELOPMENT OF NCT DELHI
Meenakshi Dhote ............................................................................49
NORTH EAST DIARY
PANIDIHINGA PARADISE OF BIRDS
Mouchumi Gogoi ............................................................................55
PROTECT INDIGENOUS BIODIVERSITY AND KNOWLEDGE
Vandana Shiva ................................................................................60
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YOJANA June 2013 3YOJANA June 2013 3
You are, Therefore I am
It may be a little surprising to know that the rst civilisation in the world to collapse due toecological factors was Sumer in Mesopotamia more than 4000 years ago. You may perhaps bethinking that it was some natural disaster that led to the extinguishing of the Sumerian civilisation.
But the reality is different. In fact it was ,in a great measure, a man made catastrophe caused by the
increasing salinity in the extensive irrigation channels built by the Sumers for cultivation. Indeedhistorical and archaeological evidence points out that ecological factors played a crucial role inthe collapse of a number of ancient civilisations like the Indus Valley, Greek, Phoenician, Romanand the Mayan. Today again, a similar possibility is staring us in the face threatening to begin theEndgame.
Apparently, the mankind has come a full-circle over this period so far as its relationshipwith nature and the surroundings is concerned. It has been argued that the chief causes of theenvironmental destruction do not lie in individual choices like higher consumption. These arerooted in the social and historical realities arising out of the specicities of the modern industrial world and the gamut ofeconomic relations arising out of it between individuals and the nations at large. Whatever view you may hold about thecauses of the environmental crisis we face today, there is no doubt that in the modern quest for conquering the earth weare clearly in the danger of overstepping the critical thresh holds whether it is the fossil fuel consumption, exploitation ofrivers and under-ground water, Green House Gases emission and similar other indicators.
Environment is an issue that does not really obey the boundaries we have erected on the map. The interconnectednessof the human existence on the earth is most clearly reected when we discuss questions of environment and ecology.The long debate about environment and development is not yet settled even while the nations struggle to nd a model ofsustainable development without destroying the ecology. Despite the universal nature of environmental issues, when itcomes to equitable burden sharing of the carbon footprint left by the countries, the debate between per capita emissionapproach and the total emission approach continues to be deeply contentious. It becomes an important fact in internationalclimate change negotiations when we nd that the developed western countries contribute more than 50 percent to thetotal carbon emission in the world. It is difcult to convince a developing nation not to invest in setting up factories andindustries to improve the living standards of its citizens in the name of environmental concerns alone.
The range of issues concerning environment and ecology is truly complex and bewildering. From the existing
economic structures to our consumption choices, tribal rights over natural resources to imperatives of economic development,common environmental resources of the mankind vs national priorities all have trade-offs and require choices to be madefor which there exists no consensus. The policy responses to these issues are often difcult to make and involve a long andarduous process of consultation with the stake holders at multiple levels. The multitude of movements, many of which arepolitical and some times violent also, centred around the issues of environment reect on the one hand the lack of consensuson these issue and on the other, the vibrancy and resilience of India as a democratic nation.
While we ponder over the issue of environment and sustainable ecology, we realise that the scale of transformationof nature by man has been unprecedented, its rate of change staggering. The great thinker and proponent of IntermediateTechnology E.F. Schumacher asserted that the problem of environmental deterioration is not just technical but it stemsfrom the life cycle of the modern world, its most basic beliefs-its metaphysics. We must realise the essential unity of theuniverse and the interconnectedness of the existence of all life forms, indeed all of nature. It is the time we adopted the
Zulu philosophy of Ubuntuwhich translates into You are, therefore I am.q
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YOJANA June 2013 5
NDIAS ATTEMPTS
a t i n t e g r a t i n g
e n v i r o n m e n t a l
sus ta inab i l i ty in toeconomic planning have
so far been piecemeal
and hesitant. They have done
little to stem the rapid slide
into ecological devastation and
consequent livelihood, cultural, and
economic disruption. At the root of
this lies the stubborn adherence to
a model of economic growth that
is fundamentally unsustainable
and inequitable, even more so in
its globalised form in the last two
decades.
The 12th Plan process could
have been an opportunity to change
course, especially given its explicit
commitment to sustainability,
inclusiveness and equity. Indeed
there are some glimpses of a different
approach, e.g. making economicactivities more responsible in
their use of resources and in the
wastes they produce, promoting
urban water harvesting and public
transport, providing organic inputs
to agriculture use, encouraging
recycling, making tourism more
Integrating Sustainability into Indian
Planning
ENVIRONMENTAL PLANNING
Ashish Kothari
POLICY
Peoples
movements,
civil society
organizations,
academic think-
tanks, and
progressive political
leaders will have
to lead the way,
both by resistingtodays destructive
processes and by
building on existing
alternatives
environmentally responsible
and community-based, moving
towards low-carbon strategies, and
protecting the commons (lands andwaters that are used by the public),
giving communities more secure
rights to use and manage these. Yet
the Plan falls far short of signicant
reorientation, mostly staying within
the confines of assuming that
more growth will help achieve
these goals. It does not use any
available framework of sustainable
development, including the targets
that India agreed to at the 2002
World Summit on Sustainable
Development (Johannesberg). It
does not contain indicators to gauge
whether India is moving towards
sustainability, e.g. improvement
in per capita availability of natural
forests, reduction in the levels of
various kinds of pollution, improved
access to nutritious food and clean
water, or enhanced availability of
public transport. Environmental
considerations do not yet permeate
each economic sector.
There is in fact a palpable lack
of urgency with regard to the
ecological crisis we are already
I
The author is Founder-member of Indian environmental group Kalpavriksh, and coordinated Indias National BiodiversityStrategy and Action Plan process, has served on Greenpeace International and India Boards, He is also the author or editor
(singly or jointly with others) of over 30 books, the latest a detailed analysis of globalisation and its alternatives.
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6 YOJANA June 2013
in. Natural ecosystems are under
stress and decline across most
of the country; some 10% of the
countrys wildlife is threatened with
extinction; agricultural biodiversity
has declined by over 90% in many
regions; well over half the available
waterbodies are polluted beyond
drinking and often beyond even
agricultural use; two-thirds of the
land is degraded to various levels
of sub-optimal productivity; air
pollution in several cities is amongst
the worlds worst; modern wastes
including electronic and chemical
are bring produced at rates far
exceeding our capacity to recycle
or manage. Annual EconomicSurveys of Government of India,
and the Ministry of Environment
and Forests annual State of
Environment reports occasionally
acknowledge the widespread
environmental damage; more is
found in independent reports such
as the State of Indias Environment
reports by Centre for Science and
Environment. A 2008 report bythe Global Footprint Network and
Confederation of Indian Industries
suggests that India has the worlds
third biggest ecological footprint,
that its resource use is already twice
of its bio-capacity, and that this bio-
capacity itself has declined by half
in the last few decades.
Economic globalisation since
1991 has significantly increased
rates of diversion of natural
ecosytems for developmental
purposes, and rates of resource
exploitation for domestic use and
exports. Climate change impacts
are being felt in terms of erratic
weather and coastal erosion, and
the country has little in the way of
climate preparedness especially for
the poor who will be worst affected.
Projections based on the historic
trend of materials and energy use
in India also point to serious levels
of domestic and global impact on
the environment, if India continues
it current development trajectory
modeled on already industrialized
countries.
One opening provided by the
2013 Economic Survey towards
redressing the situation is the
following paragraph: From
Indias point of view, Sustainable
Development Goals need to
bring together development and
environment into a single set of
targets. The fault line, as ever
in global conferences, is the
inappropriate balance between
environment and developmentwe
could also view the SDGs and the
post 2015 agenda as an opportunity
for revisiting and ne-tuning the
MDG framework and sustainably
regaining focus on developmental
issues.
Framed in 2000, the MDGss e t a m b i t i o u s t a r g e t s f o r
tackling poverty, hunger, thirst,
illiteracy, womens exploitation,
child mortality, disease, and
environmental destruction. They
are supposed to have guided the
developmental and welfare policies
and programmes of governments.
Countries are individually, and
collectively through the United
Nations, reviewing progress
made in achieving the MDGs.
Simultaneously discussions
have been initiated towards new
development frameworks that
could more effectively lead to
human well-being while ensuring
ecological sustainability. India too
needs to engage in a full-scale review
of its achievements (or failures),
which can become an opportunity
to work out a new framework for
the post-2015 process, best suited
to Indian conditions. Here are some
ideas on what such a framework
could look like.
Elements of a New Global
Framework
A fundamentally different
framework of well-being has to
be built on the tenets of ecological
sustainability, as much as of
equity. This is clearly pointed to
in the outcome document of the
UN Conference on Sustainable
Development (Rio+20) of 2012.
A new set of global goals could
include:
(1) E n s u r i n g e c o l o g i c a l
conservation and resilience,
and the basis of equitable access
to nature and natural resources
to all peoples and communities
(respecting natures own rights)
(an expansion of current MDG
7);
(2) Providing adequate andnutritious food for all, through
production and distribution
systems that are ecologically
sustainable and equitable
(currently part of MDG 1);
(3) Ensuring adequate and safe
water for all, through harvesting
and distribution systems that
are ecologically sustainable
and equitable (currently partof MDG 7);
(4) Safeguarding conditions for
prevention of disease, and
maintenance of good health,
for all, in ways that are
ecologically sustainable and
equitable (currently partly in
MDG 6)
(5) Providing equitable access to
energy sources in ways that
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YOJANA June 2013 7
are ecologically sustainable
(as much as technically and
economically viable) (currently
missing from the MDGs);
(6) Facilitating equitable access
to learning and education
for all, in ways that enhance
ecological sensitivity and
knowledge (as much as cultural,
technical, technological, socio-
economic, and other aspects)
(an expansion of MDG 2);
(7) Ensuring secure , safe ,
sustainable, and equitable
settlements for all, including
adequate and appropriate
shelter, sanitation, civic
facilities, public transportation
(currently partly in MDG 7,
partly missing)
In all the above, the special
needs of women and children
will need to be secured, through
rights-based and empowerment
approaches (currently in MDGs
3,4,5).
Such a framework needs tobe based on a set of universal
principles, including:
l The functional integrity and
resilience of the ecological
processes and biological
diversity underlying all life on
earth, respecting which entails
a realization of the ecological
limits of human activity, and
enshrining the right of natureand all species to survive and
thrive in the conditions in
which they have evolved.
l Equi table access of all
people, in current and future
generations, to the conditions
needed for human well-being
(socio-cultural, economic,
political, ecological, and in
particular food, water, shelter,
clothing, energy, healthy
living, and socio-cultural
sustenance); equity between
humans and other elements of
nature; and social, economic,
and environmental justice for
all.
l The right of each person
and community to participate
meaningfully in crucial
decisions affecting her/his/
its life, and to the conditions
that provide the ability for
such participation, as part
of a radical, participatory
democracy.
l Linked to the above, governancebased on subsidiarity and
ecoregionalism, with local rural
and urban communities (small
enough for all members to take
part in face-to-face decision-
making) as the fundamental
unit of governance, linked
with each other at bioregional,
ecoregional and cultural levels
into landscape/seascapeinstitutions that are answerable
to these basic units.
l The responsibility of each
citizen and community to
ensure meaningful decision-
making that is based on the
twin principles of ecological
integrity and socio-economic
equity.
l Respect for the diversity ofenvironments and ecologies,
species and genes, cultures,
ways of living, knowledge
systems, values, economies
and livelihoods, and polities,
in so far as they are in
consonance with the principles
of sustainability and equity.
l Collective and co-operative
thinking and workingfounded
on the socio-cultural, economic,
and ecological commons,
respecting both common
custodianship and individual
freedoms and innovations
within such collectivities.
l
The ability of communitiesand humanity as a whole, to
respond, adapt and sustain the
resilienceneeded to maintain
ecological sustainability and
equity in the face of external
and internal forces of change.
l The inex t r icab le in ter -
connectednessamongst various
aspects of human civilisation,
and therefore amongst anyset of development or well-
being goals: environmental,
economic, social, cultural, and
political.
A Framework for India
Following from the above, the
following goals would comprise
a new sustainability framework of
planning for India:
Macro-economic policy: The
macro-economic framework must be
radically altered to put ecological
sustainability, human well-being,
and socio-economic equity at
the core. This would include
development of macro-economic
theories and concepts that put at
their core the twin imperatives
of ecological limits and socio-economic equity. It would also
entail reorienting nancial measures
such as taxation, subsidies, and
other scal incentives/disincentives
to support ecological sustainability
and related human security and
equity goals. A long-term national
land and water use plan needs to
be framed, based on decentralised
and participatory processes. Also
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8 YOJANA June 2013
needed are human well-being
indicators, through appropriate
tools, to replace the current GDP
and economic growth-related
ones.
Political governance: Equally
important as above, a new polity isneeded. Principles and practice of
radical or participatory democracy
need to infuse all decision-making,
with the smallest rural and urban
settlements as the basic units,
and landscape level institutions
bu ilding on these. Panchaya t,
urban ward, and tribal council
institutions would need not only
strengthening but modificationsto ensure they are functioning
at these basic units in which all
residents/members can take part.
Ways to ensure accountability of
representatives (e.g. through right
to recall) at larger levels, upto the
national level, have to be built
in. An immediate step could be
creating institutions of independent
oversight on environmental
matters, such as an office of an
Environment (or Sustainable
Well-Being) Commissioner who
has a Constitutional status similar
to the CAG or Chief Election
Commissioner.
Safeguarding the natural basis
of life: The integrity of natural
ecosystems, wildlife populations,and b iod ivers i t y , mus t be
safeguarded, by reducing and
eventually eliminating resource and
biodiversity loss, and regenerating
d e g r a d e d e c o s y s t e m s a n d
populations. This would include
providing rights to nature and non-
human species in the Constitution;
expanding the coverage of areas
specially dedicated to or helping to
achieve biodiversity conservation
through fully participatory and
democratic means; integrating
conservation principles and
practices in land/water use activities
across the board, in both rural and
urban areas; and phasing out the
use of chemicals in agriculture,
industry, and settlements, that
lead to irreversible ecological
degradation and the poisoning of
wildlife.
Ensuring basic needs for
all: All people must have access
to safe and adequate resources
to fulfill basic needs, in ways
that are ecologically sustainableand culturally appropriate .
This includes safe and adequate
drinking water to all, largely
through decentralised harvesting
and distribution systems; safe
and adequate food to all, focusing
primarily on agro-ecologically
sound practices and localized
production/distribution systems
including localized procurementfor the Public Distribution System
and other food schemes for the
poor; unpol lu ted ai r and sa fe
sound levels for all; safe, adequate
and sustainable shelter/housing to
all, facilitating community-based,
locally appropriate methods;
energy security for all, optimizing
existing production sources and
distribution channels, regulatingdemand (denying, especially,
luxury demand), and focusing most
new production on decentralised,
renewable sources; and adequate
sanitation facilities to all families
and communities.
E n s u r i n g u n i v e r s a l
employment and livelihoods:
All fa mi lie s and commun iti es
must have access to dignified
livelihoods that are ecologically
sus ta inab le and cu l tura l ly
appropriate . This includes
encouraging natural resource
based livelihoods (forest-based,
sheries, pastoralism, agriculture,
crafts, and quarrying) that arealready ecologically sustainable;
replacing unsustainable, unsafe
and undignified livelihoods in
all sectors by dignied, green
jobs (which according to ILO
would yield more employment
than conventional sectors); and
investing heavily in livelihoods
relating to ecological regeneration
and restoration.
E n s u r i n g s u s t a i n a b l e
production and consumption:
All production and consumption
must be ecologically sustainable
and socio-economically equitable,
using a mix of incentives and
d i s i n c e n t i v e s . Th is means
c o n v e r t i n g a n d r e p l a c i n g
unsus ta inab le agr icu l tu ra l ,fisheries, mining, industrial,
and other production processes
to sustainable ones; ensuring
extended producer responsibility
for sustainability at all stages from
raw materials to disposal/recycling/
reuse, through incentives and
legislation; curbing unsustainable
c o n s u m p t i o n i n c l u d i n g
advertising that encourages suchconsumption (perhaps creating
an Above Consumption Line
measure as counterpoint to
Below Poverty Line measure;
encouraging innovations in, and
making mandatory the use of,
technologies of sustainability
including those that reduce
resource-intensity of products
and processes, and discourage
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YOJANA June 2013 9
(eventually eliminating) those that
are inherently unsustainable and
inequitable; and moving towards
a zero-waste society.
E n s u r i n g s u s t a i n a b l e
infrastructure:All infrastructure
development must be ecologicallysustainable and socio-economically
equitable.This entails integrating
practices of sustainabili ty into
existing infrastructure, replacing
unsustainable practices with
sustainable ones (e.g. focus on public
instead of private transportation);
and ensuring all new infrastructure
is built on principles of ecological
sustainability.
Ensuring sus ta inabi li ty in
services and welfare:All service
and welfare sectors must integrate
principles and pract ices of
ecological sustainability. Health
services should focus on preventing
ill-health due to environmental
degradation (e.g. unsafe or
inadequate food and water), and
on curative practices that are
ecologically sound (including
nature-based indigenous systems).
Local and wider ecological,
cultural, and knowledge systems
need to be integrated into education
policies and practices, ensuring that
ecological sensitivity becomes a
part of every subject. Tourism and
visitation need to be converted
to practices that are ecologically
sustainable, culturally appropriate,
and local community driven.
Each of these goals will contain
specic targets and actions, and
indicators to assess levels of
success and failure. A set of tools
are also needed that can help
in the assessments. There are
already several sets of indicators
and tools being used or proposed
around the world (including within
India), from which we could
develop a set of indexes that is
robust, relatively easy to calculate,
amenable to public understanding
and participation, and capable
of integrating complexity and
nuances. Some of the exciting
new work being done outside
India, such as the Happy Planet
Index proposed by the New
Economics Foundation, Bhutans
Gross Nat ional Happiness ,
Environment Vulnerability Index,
and others could be examined.
Tools such as Ecological/Carbon
Footprints, National Accountsof Well-being, Environmental
Accounting and Budgeting, and
so on could be combined to assess
progress towards sustainability and
equity. But this should not simply
become an exercise in numerical
target-setting, and mechanical
enumeration of what targets have
been met ; it needs to integrate
into a holistic vision that hassustainability, equity, and well-
being as its pillars.
Overcoming the hurdles
There are several hurdles to
achieving the above: inadequate
understanding of the impacts of
human activities on the environment,
continuing tension between various
knowledge systems hamperingsynergistic innovation, a political
leadership that for the most part lacks
ecological literacy, unaccountable
corporate and military power, and
a feeling of helplessness or apathy
amongst the general public.
If we are to surmount these
hurdles, we have to support and
learn from alternatives already
existing on the ground or in policy,
in India or globally. Information
already available on trends in
sustainability and unsustainability
should be collated, and further
information generated to ll gaps in
understanding. Public discussions
and consultations, involving allsections and in particular local
communities in rural and urban
areas, should be initiated on the
contours of a new framework of
well-being. Such a framework
should underlie the 13th 5-Year
plan.
Of course, this will not happen
if left to todays political and
bureaucratic leadership, though
undoubtedly their role is vital.
Most crucial is public and political
mobil izat ion and pressure .
Peoples movements, civil society
organizations, academic think-
tanks, and progressive political
leaders will have to lead the way,
both by resisting todays destructive
processes and by bu ilding onexisting alternatives. Partnerships
with similar sectors in other
countries will help.
India already has thousands of
initiatives at solving food, water,
energy, health and other problems
through sustainable means; it also
has crucial policy breakthroughs
like the Right to Information Act.
But these are dispersed and often
isolated, not yet forming a critical
mass sufficient to bring about
fundamental changes in the system.
A framework vision of the kind
outlined above is beginning to
emerge from, and could help bind
together, these currently dispersed
processes. q
(E-mail :[email protected])
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YOJANA June 2013 11
RECALL MY first
national publication
in Yojana in June
1993 issue whichr e v i e w e d t h e
efcacy and status of
Indias environmental legislation,
following the strategic article
by then Prime Minister Late Sri
Narsimha Rao depicting the concern
on environment and extrapolating
it for sustainability of economic
growth. India has a prestigious
history on environmental fronts
be it the Stockholm Conferencein 1972 which was attended by
Late Smt. Indira Gandhi, or the
UN Conference on Environment
and Development, 1992 at Brazil
where Indias contribution and eco-
concerns also gured in shaping the
historic Agenda 21. It was in 1991
that the Honble Supreme Court
issued a directive for compulsory
environmental studies in allundergraduate programmes in the
country. It is regretable that it hasnt
been uniformly implemented even
with the passage of two decades.
In another article on environmental
policy concerns in Yojana in 1996
February, I tried help prioritize the
issues for immediate concerns.
Climate Risk: Critical Challenges
ENVIRONMENT AND SUSTAINABLE ECOLOGY
Anil Kumar Gupta
CHALLENGES
No model ofeconomic growthcan sustain for
long if it doesntrespect ecology inlocal and regionalcontext, and at
the same time theenvironment asbroad concern
including theinter-relationships
of natural,human-made and
socio-culturalenvironments
There are signicant efforts to
promote green cover in urban areas
with noted success, but at the same
time vast tracts of natural greencover of forests and rural areas have
been lost owing to increasing biotic
pressure, low regeneration and
devastating side effects of poorly
planned developmental projects.
India has a new water policy of
2012 now, but without subjecting it
to a formal system of environmental
assessment , despi te having
globally accepted tool strategic
environmental assessment (EIAof policies and plans) in practice.
I wrote in Yojana May, 2000 on
water policy and integrated water
management calling for a system
approach, which in turn also calls
for coherence of water, land, energy
and forest related policies with
the broad environment policy.
Fortunately the environment policy
of 2006 at least mentioned this.The recent reinforced calls at
global level to integrate disaster
risk reduction and climate change
issues within the broad umbrella
of environmental management for
sustainability and inclusive growth
has attained momentum with the
UN led Partnership of Environment
I
The author is Senior Associate Professor of Policy Planning at National Institute of Disaster Management, New Delhi, and
President of Centre for Disaster Management, Environment and Sustainability, New Delhi.
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12 YOJANA June 2013
and Disaster Risk Reduction (UN-
PEDRR).
Climate Risk and Indias
Environment
Whereas many regions are
likely to experience adverse effects
of climate change of which some
are potentially irreversible, in some
cases certain impacts are likely to
be benecial as well. The World
Bank Study entitled Managing
Cl ima te R i sk : I n t eg ra t i ng
Adaptation into World Bank Group
Operations identied the result of
environmental changes in South
Asia as following:
l Decreased water availabilityand water quality in many arid
and semi-arid regions
l Increased risk of floods,
droughts, and water borne
diseases / epidemics
l Reduction of water regulation
in mountain habitats
l Decrease in reliability of
hydropower and biomass
production
l Increased damages and deaths
caused by extreme weather
events
l D e c r e a s e a g r i c u l t u r e
productivity, in sheries and
sustainability of ecosystems
The World Bank interpreted the
consequences of these impacts in
form of severe economic shocks,which will exacerbate existing
social and environmental problems,
and migration within and across
national borders.
So far most policy interventions
related to climate change were
mitigation centric and broadly
based on geophysical parameters.
However, the focus is now
shifting towards vulnerability
reduction centric and adaptation
approach which at the same
time facilitates climate change
mitigation-adaptation convergence
with disaster risk reduction. The
Millennium Ecosystem Assessment
(2005) that emphasized livelihood
and food security as key challengesof human vulnerability is an insight
to understand the significant
efforts of Intergovernmental Panel
on Climate Change (IPCC), in
particular the 4thAssessment Report
and the recent Special Report on
Extreme Weather Events (SREX)
to draw the concerns for South Asia
and more particularly for India.
A 4x4 assessment of climate
change impacts on India, organized
by Ministry of Environment &
Forests (2010) has concluded with
serious concerns on impacts on
agriculture, water security, health
and forests, more particularly in
Himalayan region and coastal areas.
The impacts have been observed in
terms of changing rainfall patterns,
intensity, number of rainy days,hottest and coldest days, hot/cold
waves, sea level rise, cyclonic
storms, etc., whereas improper
land use coupled with ecological
degradation has aggravated peoples
vulnerability to these climatic and
the other geophysical disasters like
earthquake, landslides, etc.
Besides the availability concern,
quality of water (be it ground
or surface waters) is critical in
health and agriculture. Air quality
is deteriorating despite the
efforts governments made over
past decades. Waste management
situation in many cities of the
country has improved but is far from
satisfactory, and urban flooding
has become a common annual
menace.
Ecosystem Services: Economy
and Livelihoods
The environmental problems
in India are growing rapidly. The
increasing economic development
and a rapidly growing population
that has taken the country from300 million people in 1947 to more
than one billion people today is
putting a strain on the environment,
infrastructure, and the countrys
natural resources. The Global
Assessment Report on Disaster Risk
Reduction: Risk and Poverty in a
Changing Climate (2009) identies
ecosystem decline as a key driver
in exacerbating natural hazards in
the future. Indian economy is likelyto grow at 6.4 per cent rate in 2013
outpacing the 6 per cent expansion in
developing Asia-Pacic economies
in the same period. However, the
current projected growth is below
its own pace of the past. The global
economic slowdown starting 2008
has made us to review on the
limitations our ecological systems
and non-renewable resourcespose to our economic growth. We
need to analyze our scal balance
sheets again for expenditures on
managing the challenges arising as
a consequence of environmental
degradation on different time-
scales.
India is now the worlds third
biggest carbon dioxide emitting
nation after China and the US. Thenew emission data from the United
Nations published in early October
2010 is a probable cause of worry
for Indias climate negations in
the future. The ecosystem based
approaches for adaptation and
mitigation are the noble options
we still have. We need to evolve
approaches where we have
mitigation values for the adaptation
options and strategies as well,
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YOJANA June 2013 13
and at the same time disaster risk
reduction as the benet. We have
not only spoiled our wetlands and
river systems, but the entire land-
soil system, making it chemical
intensive in its composition in quest
of immediate high returns.
Green revolution was needed
as India then needed food to feed
the people. Now the concept
of 2nd green revolution has to
be built up with great caut ion
and concerns for sustainability.
Natural resource related activities
form major livelihood for Indias
population. Land, water and
bio-productivity cannot be dealt
in isolation. The MillenniumEcosystem Assessment (2005)
refers to natural systems as
humanitys life support system
providing essential ecosystem
services for existence and socio-
economic well being. Twenty four
services are classied under major
four categories:
a) Provisioning services, the
material that people extract
directly from ecosystems such
as food, water, and forest
products;
b) Regulating services, which
modulate changes in climate
and regulate oods, drought,
disease, waste and water
quality;
c) Cultu ral servi ces, which
consists of recreational
(tourism), aesthetic andspiritual benets, and
d) Supporting services, such as
soil formation, photosynthesis
(food production, oxygen
generation) and nutrient
recycling.
Human Security and Disaster
Management
The World Summit on Social
Development (2005) noted the
reconciliation of environmental,
social equity and economic
demands as the three pillars of
sustainability. An imbalance in one
or more of these may exacerbate the
impact of a natural or impending
humanitarian crisis, resultingin a disaster like situation. The
challenges of naxalism may be
understood in ecological terms of
forests, people and livelihoods,
which due to our failure to address,
have grown up to emergent state in
such areas. Environmental refugees
from the regions affected by
natural calamities, insurgencies, or
due to developmental interventions
like in case of large dams, or
migrants for livelihoods are one
of key humanitarian concerns
worldwide as well as in India.
Poor , down t rodden and
marginalized people, landless,
or those occupying low cost but
hazardous locations for their housing
and occupations, are the ones most
and worst affected by natural
disasters like earthquake, oods,
drought, cyclone and diseases.
Relationships between environment
and disasters are inextricable. We
need to understand the ecology
of conicts, vulnerability, human
behavior, and thereby of the
disasters, for their effective and
preventive management.
It is worthwhile to mention
that our initiative in India during
2008-9 on integrated environment
and disaster risk management,
when noticed by the United
Nations Environment Programme
(UNEP), was followed by a high
level meeting at the UN Campus
Bonn in Germany, to evolve a UN
Partnership of Environment and
Disaster Risk Reduction. First
capacity building programme on
Ecosystem Approach to Disaster
Risk Reduction (ecoDRR) was
piloted in Sri Lanka and followed
by New Delhi in 2011 itself. Recent
release of Disaster Management
and Risk Reduction (2013) as
follow up to the Government of
India publication (NIDM) onEcosystem Approach to Disaster
Risk Reduction (2013), that related
to United Nations University
(UNU) bringing a special volume
entitled Role of Ecosystems in
Disaster Risk Reduction.
Issues of Critical Concern
Looking to the present state of
Indias environment and contextof climate-change, disasters
and corporate environmental
governance, following issues have
been identied for critical concern
in academia and policy planning:
1. N a t u r a l d i s a s t e r
management: Number of
natural disasters continue to
rise in India and the region,
with heavy toll on human lives,environment and economies.
Losses due to water and climate
related disasters far exceed
that of purely geophysical
ones. On the other hand,
chemical intensive economic
development has increased
the risk of industrial-chemical
disasters. Disaster management
needs to be a priority subject
for intervention as it has greathumanitarian aspects.
2. Environmental-Health:
Despite theneed, the aspects of
environmental health including
those related with water,
sanitation, waste management,
t o x i c o l o g y , h a s b e e n
inadequately addressed due
to lack of policy intervention.
We need to have integrated
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14 YOJANA June 2013
policy direction on preventive
and social health issues in the
country.
3. Natural Resource Systems:
Be it a river, a wetland, forest,
land or soil, urban area or a
crop field, the management
of natural resources need to
be evolved with consideration
of these as system and with
the scientic understanding of
resource rather than treating
them primarily as source.
4. Environmental liability:
E n v i r o n m e n t a l p o l i c y
implementation cannot be
effective unless the concept of
absolute liability is enforcednot only in context of industrial
hazards or pollution but equally
in relation to ecosystem
integrity, sustainability and
natural resources. Liability
should be integrated with
accountability and must also
include the Government,
monitoring agencies and
decision makers.5. State/District Environmental
Action Plans: We have
Nat ional Environmental
Protection Act (1986) but could
not regulate the mandate for
environmental action plan at
state, district and local levels.
This is an emergent need. Plan
should have a time frame,
6. EIA and SEA improvements:E n v i r o n m e n t a l i m p a c t
assessmentis an effective and
noble instrument of policy
and legal enforcement but,
however, is under question in
India due to its marketplace
image. It requires scientific
and academic community
to come forward together
to intervene and take up
research studies on validation
of such reports. Another
approach where EIAs are
done by Government agencies
responsible for decision making
may also be thought of, but
with xing accountability for
their interpretations. Strategic
Environmental Assessment(SEA) is a recognized tool for
environmental screening of
policies, plans and programmes
in practice in particular in
advanced countries. On
initiative of UNU and UNEP,
we have worked out a protocol
for EIA and SEA application
in disaster management.
Recently, Sri Lanka carried outan SEA of its North Province
before launching post-conict
developmental plan. We need
to learn and evolve to scrutinize
our economic and other
strategic decisions for their
impacts on different aspects
of environmental quality and
resources.
7. Environmental Audit :Environmental audi t in
mandatory terms is a formal
procedure in India, except big
industries and corporations
conducting detailed audits
voluntarily. Practice of
comprehensive environmental
auditing must be compulsory for
all industries, establishments
including housing complexes,municipalities, and institutions
with signicant water, energy
and material balance or
involving hazards.
8. N a t u r a l R e s o u r c e
Accounting: The concept and
practice of natural resource
accounting or green accounting
was mooted and pilot studies
undertaken during 1990s.
However, the practice didnt
continue to grow. The concept
of green accounting and green
GDP must be integrated
with nat ional and s ta te
environmental action planning
as well as with developmental
planning.
9. Economic evaluation of
environmental impacts: In
the absence of proper economic
evaluation, environmental
impacts and hazards are
not given due importance
in planning and decision
making. For example, the
environmental damages and
losses due to disasters andenvironmental needs following
a disaster situation havent
been evaluated on economic
terms. This results in their
undermining. The practice of
ecological economics needs
to be promoted in research,
planning and monitoring of
developmental plans and
policies.10. Ecological Auditing (Eco-
Audit): This is rather a new
tool, extended from the
principle evolved a decade
ago. This focuses on auditing
of natural resource systems
and environmental quality
aspects on ecosystem approach.
This takes into account the
ecosystem capacities, services
and related sustainability
parameters in the context of
internal, external and human-
induced factors.
Revisiting Economic Growth to
Sustainability
Sustainability is the capacity
to endure. In ecology it describes
how biological systems remain
diverse and productive over time.
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YOJANA June 2013 15
For humans, sustainability is the
potential for long-term maintenance
of well being, which has ecological,
economic, political and cultural
dimensions. Healthy ecosystems and
environments are necessary to the
survival and ourishing of humans
and other organisms. Chennai basedCentre for Development Finance
has developed Environmental
Sustainability Index 2011 for
Indian states considering the
achievements, challenges, priorities
and present state of environment.
The study found the north-eastern
states as most sustainable whereas
the least sustainable states are
Bihar, Haryana, Gujarat, Punjab,
Rajasthan & Uttar Pradesh.
Poverty, disparity and inequality
are key factors that aggravate
peoples vulnerability to hazard
be it of a natural, human-induced,
technological or socio-political
origin that may result in a devastating
situation or crisis. These factors are
in turn aggravated by ecological
deprivation and poor management
of natural resources, coupled with
infrastructure disparities brought in
by the techno-scal intensication.
No model of economic growth can
sustain for long if it doesnt respect
ecology in local and regional
context, and at the same time the
environment as broad concern
including the inter-relationships of
natural, human-made and socio-
cultural environments. Unless weunderstand the ecological basis of
conflicts and evolution of local/
regional terrorism, we often fail to
nd sustainable ceasere solutions.
Alternative models of sustainable
land use economies need to be
worked out taking care of climate
change adaptation and disaster risk
concerns as well.
Sustainability interfaces with
economics through the social and
environmental consequences of an
economic activity. Sustainability
economics involves ecological
economics where socio-cultural,
economic and health-related aspects
are integrated. Now, in the times
when we are calling for Integrateddistrict planning process, we
need to evolve the models and
protocols for ecological compatible
integrated planning at state, district
and local levels. At the same time,
it is important to recognize the
ecosystem relations between urban,
rural and industrial development
planning. Figure 1 shows economics
as a function within social arena of
the environment as recognized
by Scott Cato (Green Economics,
2009, Earthscan). Adams (2006)
enumerated the pressure balance
among environment, economics and
social functions under a sustainability
framework (International Union for
Conservation of Nature, Figure 2).
However, environmental economics
new focus is on the economic
valuation of ecosystem services
in immediate and long-term
parameters that helps understand
need for ecological sensitive
developmental planning process.
In India as well, the concept of
Green GDP is upcoming which
should help promote sustainability
concerns into developmentaleconomics as well.
N a t i o n a l E n v i r o n m e n t a l
Protection Agency
Disaster management is a state
subject, whereas environment
is a broad concern divided and
shared between central, states and
concurrent lists, in the schedules of
Indias Constitution. In most casesStates enjoy the powers delegated by
Central Government. Therefore, an
apex agency should not be only an
authority to develop broad policies
and guidelines but also its own
standards, and need to be responsible
and accountable for their proper
and effective implementation at
the ground levels as well. We need
to learn from the United States
model of Environmental ProtectionAgency. Pollution Control Board
concepts are obsolete and need to be
abolished to bring a cultural change
in environmental management, by
replacing it with Environmental
Protection Agencies with a uniform
institutional framework at State,
district and Urban local bodies
level. It is also important that a
standard ratio of scientic, technical
and social experts is maintained in
these agencies at all the levels.
Policy Interventions: National
Environmental Council
Broad Paradigm Shift is needed
from fragmented and spontaneous
response or wait until emergent
approach to accountability and
liability based proactive culture of
prevention and infused mitigation
Figure 2: Sustainability challenge is of
the balance in a win-win mode
Figure 1: Economy as a function within
society and environment
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16 YOJANA June 2013
approach on environmental
protection affairs including
climate-change, natural disaster
management, chemical safety,
environmental health and overall
natural resource management
system. Prime Ministers Council
of Climate Change may be renamedas Prime Ministers National
Environmental Council offering
an umbrella coordination of
Ministries like Environment and
Forests, Earth Science, Science &
Technology, environment related
divisions of DST, ICAR, ICMR,
DBT, CSIR, ICFRE, ICSSR, UGC,
National Biodiversity Board, etc.
and international organizations
like UNEP, IPCC, WMO, WHO,
UNDP, UNESCO, etc.
Development and promotion of
environmentally compatible models
for inclusive growth and sustainable
economic development at village,
taluka and district levels may be a
key objective. Intensive and effective
drives of capacity building and
awareness shall be needed to attain
its objectives. A policy guidelineon environmentally compatible
integrated district-planning need
to be developed. It is ironical to
note that India as a country 'though
loud enough in global platforms
of Stockholm and Rio de Janeiro'
has missed to represent ecology
in its constitution of strategic
and planning organizations like
Planning Commission, NationalDisaster Management Authority,
National Investment Agency, etc.
The time has come when we need
to be sensitive to own long-term
sustainability and feel accountable
for all our deeds.
Education and Research
Environmental research in the
country is fragmented with much
of duplicacy, gaps and sometime
with conflicting conclusions.
The proposed National Council
and National University may be
mandated to share the strategic
responsibility of organizing and
coordinating with the relevant
agencies a broad network forum
to avoid these challenges. Someof the states/UTs have integrated
their science & technology councils
with environment, and is a welcome
move. University and college
curriculum of environmental
studies need to be diversified
to meet specialized needs for
professionals on its sub-disciplines,
viz. environmental health, system
ecology, climate change, disaster
management, EIA, law & policy,
environmental economics, industrial
hazards, etc.
Education and training in
environmental studies need be
diversied with specializations at
University/college levels to focus
on emergency issues and challenges.
Our experts and Governments
have taken a great steps towards
environmental awareness of themasses including college youth and
children, but could not mandate
a compulsory orientation of our
legislators and Government ofcials
of all levels including sub-district
and local levels who built up the
administrative priorities of the
governance. This is one reason of
increasing conicts between public
or civil society and Governmentas their perceptions do not match
at all.
N a t i o n a l U n i v e r s i t y o n
Environment and Sustainability
For more than two decades,
there has been a demand for a
central institution on environmental
research and training which at the
same time shall award degrees
and professional certification in
the areas of environment. In the
present times, when disasters,
climate change and health risks are
emergency challenges, a National
University on Environment and
Sustainability Studies (UNEST)
need to be established by the
Central Government to caterthe needs of quality research,
training and education leading to
masters and research degrees, and
will extend advisory support in
assessments, planning and policy
making. The institute may be
mandated also to host a forum
for organizations and institutions
working on environment, climate
change and disaster management
issues in the country, to facilitate
exchange of knowledge, skills, and
professional value addition.
University Grants Commission
has supported Universities and
institutions on innovative course
and research programmes on
concurrent issues in environmental
sciences and notified a model
curriculum on disaster management
for all undergraduate course in thelines of compulsory environmental
studies. Ministry of Environment
and Forests and Ministry of Earth
Sciences have also schemes
to support environment and
climate research. United Nations
Environment Programme has
expressed concern in promoting
the ecoDRR curriculum in Indian
Universities which has alreadybeen included in other countries.
Recently, UNESCO has established
a high level academic institute,
first in Asia, Mahatma Gandhi
Institute of Environment, Peace and
Sustainability which will organize
and conduct courses and research
on environment, climate and
disaster related issues of Asian
concern. q
(E-mail : [email protected])
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YOJANA June 2013 17
YE
-45/2013
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18 YOJANA June 2013
FEDERAL SET up
is considered to be
an optimal form
of government asi t combines the
strength of a unitary
as well as a decentralized form
of government. The essence of
federalism lies in proper division
of powers and functions among
various levels of government
to ensure adequate financial
resources to each level of
government to enable them to
perform their exclusive functions.
In a federation, both developed and
underdeveloped federating units
find it advantageous to remain
within a federation due to various
reasons like unied market facility,
security and nancial cooperation.
In India, federalism has evolved
from a highly centralized system
under the British regime-Lord
Mayo nancial resolution of 1871,
to a three-tier form of federation.
Evolution of Centre-States
Relations
The present federal scal system
has not evolved in a day or two but
over a long period of time starting
from the late eighteenth century.
Changing Dynamics of Centre-State
Financial Relations
CENTRE-STATE RELATIONS
Pravakar Sahoo
Amrita Sarkar
SPECIAL ARTICLE
India has evolveda noble kind of
federation whichis completely
different from theaccepted notion
of federation. Theevolved Indian
federalism is very
unique in characterand the Union-
state relationshiphas also becomeextremely complex
over the years
Though the Government of India
Act-1919 was a major breakthrough
in the history of evolution of
fiscal federalism in India, theGovernment of India Act-1935
established a clear-cut demarcation
of subjects coming under the
Centre, States and, both Centre
and States. With the independence
of the country, the federal status
of India underwent a fundamental
change with clear division of
nancial powers and expenditure
responsibilities between Centraland State governments in the
Seventh Schedule of the Indian
constitution.
The undivided Indian National
Congress under Nehru (1947-66)
in the rst two decades led to a
strong central leadership and the
Centre developed the concept
of a patriarch controlling the
Indian federation. The Centre-staterelations were simply a reection
of relations between the state
branches of the congress party and
its central leadership. However,
over the last 60 years many changes
have been incorporated in the
Indian federation through different
const i tut ional amendments ,
A
Pravakar Sahoois an Associate Professor, Institute of Economic Growth, Delhi University. Amrita Sarkar is an intern withthe Institute of Economic Growth, Delhi.
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YOJANA June 2013 19
changes in criteria for devolution
of resources etc to fulfill the
objectives of scal federalism viz.,
reducing fiscal imbalances and
ensuring provision of equal level
of public services like education,
health etc across all states at
similar rate of taxes.
The most important aspect of
scal federalism is the division of
resources and functions between
different levels of governments.
The existence of scal imbalances
i s inherent in most of the
federations since the division of
resources goes in favour of the
central government to achievethe objectives of stabilization and
distribution. Similar is the case
of Indian federalism where there
is a mismatch of resources and
expenditure responsibilities at
different layers of government.
Though inter-governmental
transfers take place to reduce scal
imbalances and provide average
level of public services across the
sub-national governments, there
exist scal imbalances and regional
disparities across the states even
after 60 years of independence.
The transfers from Centre to
States take place through three
channels, namely, Union Finance
Commission (UFC), Planning
Commission (PC) and Central
Ministries, of which the transfers
from FC are predominant. Gross
devolution and transfers (GDT)
comprises of States share in
central taxes (SCT), grants-in-aid
and gross loans from centre. Gross
Transfers to the states have been
rising over past decades except for
a dip in 2011-12.
T h e U F C a n d P C t a k e
equalization as the most important
general objective while making
federal scal transfers. Thereforeas required from time to time,
different UFCs and PCs keep
changing the method of federal
fiscal transfers to ensure the
objective of equalization. Different
approaches by different UFCs
have differential impact on the
resource transfers to the states.
The tax sharing is based on the
general criteria like population,
geography, backwardness, poverty
ratio, inverse per capita income,
distance formula, revenue gap
etc. After the seventh FC, the high
(almost 90%) weightage given
to population has been gradually
lowered and alternative measures
such as inverse formula and distant
formula have been given more
importance in sharing both income
and union excise duties. However,
these criteria have been multiplied
by the scale factor population
thereby giving more importance
to population.
The dependence of states on
Central transfers varies depending
on the capacity of the states to
generate own resources. For
high income states it varies from
one-fourth to one-sixth of their
revenues, for middle-income statesbetween one-third to one-fifth
(except for Chhattisgarh and West
Bengal where dependency is much
higher, almost 40-50%) and for
low-income states it is quiet high
ranging from 42-80%. In case of
Special Category States, these
Central transfers are very high
varying from 64.98% to almost
93% of their revenue receipts.
Haryana is the least dependent
State on central transfers, followed
by Punjab, Maharashtra, Gujarat
and Goa. Given the need of the
states, FC has been trying to
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July
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August (Special Issue)
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July 2013&
August 2013
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20 YOJANA June 2013
transfer more resources to the
States. For example, the share
of the States in the net proceeds
of central taxes and duties have
increased from 29.5% in 11th FC
to 32% in 13thFC.
Issues between Centre andStates
With the inception of economic
reforms in 1991, the responsibility of
the States has gone up substantially
in meeting the increasing need of
the basic services of the people.
Over the years, the centre has
become stronger in terms of higher
revenue potential while states got
burdened with greater functional
responsibilities in the areas of
education, health, economic
and social infrastructure, social
security and welfare. This has
increased vertical scal imbalance
and a l so hor izonta l f i sca l
imbalances due to differential
performance of the states during
post-reforms period. As a result
inequality across the states andwithin the states has increased
with respect to providing public
services. Further, the enactment of
Fiscal Responsibility and Budget
Management Act (FRBMA) by
the Centre which directs States
to bring in discipline in the
management of public finances
has added pressure, particularly in
improving productive assets of thepoorer States. The scal discipline,
though necessary, has resulted
in decline in the share of capital
expenditures in most of the states,
particularly backward states. As
States are depending more and
more on market borrowing on the
face of declining central loans to
states that has led to reductions of
the tenure but increased the cost
of borrowing and worsening state
debt burdens.
I n c e n t r a l g o v e r n m e n t
transfers/assistance, over the
years, a substantial amount of
resources has been transferred
by the Planning Commissionand other ministries in which an
element of discretion exists. It
has been observed that there has
been increase in discretionary plan
grants in plan transfers through
Central Plan Schemes (CPS) and
Centrally Sponsored Schemes
(CSS) instead of increase in State
Plan Schemes (SPS). But more
plan grants under the state plan
schemes would ease the burden on
the states resources and at the same
time enable them to have more of
free outlay to allocate resources
according to States priorities.
The UFCs schemes of scal
transfers over the years, held
to serve the dual objectives of
equity and efciency within the
framework of scal consolidation,have been unable to ensure a fair
distribution of resources between
Centre and States and among
the States leading to increasing
regional disparities. This regional
disparity has been the basis
of formulating the horizontal
devolution (across states). The
intra-state disparity on the other
hand has been an area which lacks
in-depth research and opinion is
divided on whether FC should
consider this dimension of disparity
while designing the Centre-state
transfers. Given the varying
taxable capacity across states and
high revenue expenditure (almost
80% of total expenditure) with
rigid components like subsidies,
pensions, salaries, wages, interest
payments, UFCs keep a portion
of the revenues from union excise
duties to distribute exclusively
to the net decit states even after
devolution of taxes and grants-in-
aid which is an encouraging step,
particularly for backward states.
Generally, population andgeography are considered as the
most important criteria for tax
devolution as it is perceived to be
the most important indicator of
the general need of a state. This
approach is justied when there are
very insignicant differences in
area, distribution of population and
per capita income among states.
But, there are signicant differencesin these indicators among the
States in India. Keeping this
problem in view, more weightage
has been given to distance and
inverse formula in last few UFCs
but population has been used as the
scale factor. This high weightage
given to population may not result
in more transfers to states which
are underdeveloped and having
low population. The central plan
assistance is being given on the
basis of Gadgil formula (changes
have been made since nineties),
which takes population, per capita
income, tax efforts and special
problems into account. The criteria
such as fiscal performance, tax
efforts, prudent scal management,
and elimination of illiteracy and
successful implementation of land
reforms etc over the time have not
helped states with differential scal
and administrative capabilities.
Decentralization Issues
Following the 73rd and 74th
Amendments to the constitution,
Ind ia has become a th ree-
tier multi-level federalism.
Along with Central and State
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YOJANA June 2013 21
Governments, India has 2.5 lakh
local governments, comprising
over th ree mi l l ion e lec ted
representatives which makes
India the largest democratic and
federal country. The signicance
of the local bodies is measured in
terms of the percentage of local
governments to total public sector
expenditure and share of local
government expenditure to GDP.
Compared to other countries in the
world, India stands at the lower
end of the spectrum with a share
of local governments at only 5.1%
of total public sector expenditure
(Brazil-15%; OECD-20 to 30%).
In fact this share has declined byover 20% in last ve years (from
6.4% in 1998-99). The constitution
spells out the task to the State
Fiscal Commission (SFCs) to
provide recommendations for the
PRI institutions, both urban and
rural, so that the consolidated fund
can be augmented accordingly.
However, it appears that most
SFCs do not take their instrumentalrole seriously in helping to provide
the said services and in laying
the foundations for participatory
democracy in the country.
All UFCs have indicated several
shortcomings and omission and
commission of the SFCs. The main
reasons are non-synchronization of
the period of recommendation of
SFCs and UFCs; lack of clarity in
respect of the assignment of powers,
authority and responsibilities of
the local government; absence
of time limit to take appropriate
action; etc. The 13 th UFC has
made a signicant change in the
devolution of resources to the
third tier by assigning a share of
the divisible tax revenue. This
share is on an average 1.93% of
the divisible pool of taxes for the
period 2010-15. However, this
devolution is a weak surrogate to
cover up the failure of 13thUFC to
employ a comprehensive measure
of decentralisation. The criticism
of THFC is the use of Census 2001
numbers for calculating populationshares of local grants-in-aid.
Though there is no substantial
information available about the
administrative and financial
efciency of the PRIs in the state
to carry out the responsibilities,
it is generally believed that PRIs
cannot function on their own
due to lack of administrative and
infrastructural facilities. Given the
expenditure decentralization ratio
and revenue mobilization by PRIs
in the state, local bodies are not in
a position to carry out the assigned
expenditure responsibilities. Since
the amount of grants and share
in the taxes given through SFCs
is very low, central government
needs to transfer more funds to
the consolidated fund of the Stateto fulfill the needs of PRIs. At
the same time, as more and more
of the states expenditure of the
rural/urban local government
is met by transfers from central
government the autonomy of the
states diminish likewise showing
clear signs of the dependency
syndrome. The magnitude and
trend of the percentage of the
central transfersto expenditure of
the local bodies in 2007-08 for a
few of the states are as follows :
Andhra Pradesh 51.8%; Assam-
87%; Bihar 90.7%; MP-65%;
Orissa-71.6%; Tamil Nadu- 39.4%
and West Bengal 47.8%.
Regional Disparity
There is wide variance in the
provision of basic services like
education, medical and other
infrastructural facilities leading
to discrepancies in major socio-
economic indicators like literacy
rate, infant mortality rate, poverty
ratio, and life expectancy etc. For
example the highest IMR (per
1000 births) can be seen in lower
income states such as Madhya
Pradesh (2009) 67, Orissa (65), UP
(63), Assam (61), Rajasthan (59)
respectively where as it is much
better in middle income and higher
income states. Similar is the case
of life expectancy and maternal
mortality rate. A few states were
able to attract investment (both
domestic and foreign) and do
better due to market reforms
as well as their fiscal abilities
to provide incentives and other
utilities during post reforms period.
Moreover, substantial changes in
sectoral origin of income without
appropriate re-distribution of
population has created inequality
both across the states and also
within the states. Infact, Indiais currently in the first phase,
the phase of increasing income
inequality, of the inverted U of
Kuznets curve. Therefore the role
of central transfers to states is very
important for ensuring provision
of public services at a similar
rate of taxation. It seems that the
central transfers or centre-states
financial relations has not beenvery successful in fullling the
the main objective .i.e. to ensure
equal provision of public services
across sub-national government by
reducing scal imbalances.
13thFinancial Commission
With the increasing inequality
and requirement for f iscal
discipline and macroeconomic
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22 YOJANA June 2013
stability, the scope of the 13 th
UFC was much wider than any of
the preceding UFCs. Besides the
usual tax devolution and grants to
ll the gaps in non-plan budgetary
expenditure, it was expected to
recommend several other grants
for local bodies, grants dealing
with environmental and non-
environmental issues, and also
design and implementation of the
GST. It has placed the centre and
more so, the states, in a multitude
of conditions to micro-manage
their scal system. These include
scal consolidation, disaster relief,
design and implementation of GST
and specific problems accruing
to specific states. If properly
implemented, the conditionalities
can be very effective in rationalizing
the spending priorities of the States
to ensure provision of minimum
amount and standard of public
services. However, complying and
enforcing the conditions is a major
challenge and some states have
questioned the conditionalitiesin terms of their scal autonomy.
THFC has enhanced the vertical
devolution from 30.5% to 32%
of the divisible pool of taxes.
The horizontal distribution of
this transfer is categorized as
area (10%), population(25%),
scal capacity(47.5%) and index
of scal discipline(17.5%). Even
after attaching high weights toscal capacity index, the horizontal
formula has failed to increase
aggregate share of devolution to
low-income states, which remains
stagnant at around 54% over the
period of past three UFCs. This is
while the shares of middle-income
states have declined from 29.28%
in 11thUFC to 25.8% in 13thUFC
and share of high-income has
increased from 9.75% to 11.19%
during the same period.
W i t h t h e o b j e c t i v e o f
maintaining long term stability
in the relative share of centre
and states in the total revenues,
13th
UFC have set the target fortransfers from all sources at 39.5%,
marginally higher than the 12th
FC (38%) which would be close
to 4% of the estimated GDP.
The centre is receiving huge
revenues from sources such as
telecom auctions of which the
states get no share. There is also
increase in the number of centrally
sponsored schemes involvinghuge expenditure which exceeds
the set limit. All this is going to
reduce the relative share of the
states sharply (Rao, 2010). The
approach followed by 13th UFC
is not very different from the past
UFCs as the recommendations are
made on the basis of projections
made on actual revenues and non-
plan revenue expenditures on abase year rather than estimating
the scal capacities and the needs
of the state for determining the
transfers, which is not right.
Deviating from past UFCs,
13 th UFC estimate entitlements
based on scal capacity accords
the factor a weight of 47.55 of the
total estimation. This approach
does not solve the issues regardingthe earlier gap-lling approach
and in fact has both conceptual
and methodical glitches. The
arguments given by 13th UFC in
this regard are not convincing and
it could have done well by using
a better measure of scal capacity
than simply taking the average
tax-GSDP ratio of the state as the
norm (Rao, 2010).
The objective of the transfers
is to enable the states to provide
comparable levels of services
at comparable tax rates. But the
13thUFC does not make enough
efforts to fulll this criteria and
in fact continues with the gap-
lling which has in the past always
affected the equity and incentives
of the states adversely. Unlike the
recommendation of 12th UFC of
debt write-offs and rescheduling
linked to scal adjustment, 13th
UFC conditions on the states do
not entail any incentive payments
except in the case of those that
did not pass scal responsibility
legislation as required by 12thFC.Thus there is a issue in design and
implementation.
Further, the 13th UFC report
and recommendations have been
criticized on many grounds. 13th
UFC has recommended different
scal adjustment path for Kerala,
Punjab, and West Bengal which
are states with high scal decits.
Among the 11 special category
states, different scal adjustments
have been suggested for Jammu
& Kashmir, Manipur, Nagaland,
Sikkim, Uttarakhand and Mizoram.
The 13 th UFC base year for
estimating scal discipline path
is selective which is not fair and
subjective in nature (Rao, 2010).
On the other hand, existence
of fiscal capacity distance and
an index of fiscal discipline in
the same horizontal distribution
formula is a contradiction to
achieving horizontal equity. This
is because while the first tries
to increase the scal capacity of
the states, the second limits their
expenditure according to their
revenue. 13th UFC prescribes a
GST model for the country which
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YOJANA June 2013 23
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does not fall in Finance Commission domain. Further,
it assumes that GST would be revenue neutral to both
centre and states, thereby ignoring to incorporate the
impact of GST on the rest of its recommendations.
Fourteenth Finance Commission
The role of 14th UFC is mandated with more
burdensome responsibilities in scal, economic and
social areas. The 14th UFC has been asked even to
suggest measures to raise tax ratios of both Centre
and States, improve performance of public sector
enterprises, tackle challenges in ecology, environment
and climate change. Also it is supposed to suggest
measures to amend the FRBMA keeping in view its
shortcomings. It has to address the rising trend of
widening inequality in government spending across
states and take action towards scal autonomy, which
has been substantially eroded over the years by the
implementation of scal consolidation path since the
10thUFC. It has got the job to assess the impact of
GST and device a compensation mechanism for both
centre and states and take the states in condence, so
that it can have higher acceptability.
Overall, though efforts have been made towards
a full-fledged federation, India continues to have
greater vertical scal imbalances at different levels of
governments and horizontal scal imbalance acrossthe levels of governments. India has evolved a noble
kind of federation which is completely different
from the accepted notion of federation. The evolved
Indian federalism is very unique in character and the
Union-state relationship has also become extremely
complex over the years. The role of PC, constitutional
mechanism and working of various institutions will
determine the future of Indian federation. The rising
inequality in an increasingly market economy demands
scientic approach for scal transfers from Centre
to states so that the objectives of scal federalism of
equality and the provision of providing public goods
across states is ensured. There are few issues which
remain in the domain of centre-states nancial relations
such as multiple channels of transfer; limited scope of
UFC transfers; methodological weakness and too much
reliance on the gap-lling approach, and multiplicity
of objectives failing to focus on main objective of
reducing disparities. q
(E-mail :[email protected]
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24 YOJANA June 2013
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