Tamil Nadu Finance Minister Palanivel Thiaga Rajan on Friday said the Centre should devolve more power to the State governments and local bodies to improve the federal nature of the country.

“Most countries, as they evolve, tend to get more devolved, because, as the scale and scope of the economy increases, it is natural for power to get devolved from one point to other points closer to the people. In India, it has not happened at all,” Rajan said.

He was delivering the 15th V Shankar Aiyar Memorial Lecture on the topic “The Future of Co-operative Federalism,” organised by the SIRC of the Institute of Chartered Accountants of India (ICAI).

Rajan, who is also the Minister of Human Resources Management, gave a five-point suggestion to improve cooperative federalism.

He said the Centre must stop legislating on State subjects or those on the concurrent list, which has had a well-defined understanding or interpretation for the past several decades.

DECENTRALISATION

“The heart of federalism from a State or local body perspective is the notion of the right to self-determination through that right to local self-governance. Over the decades, more than a dozen countries have proved that the greater the localisation of power, the more accountability, customisation, and results,” he added.

The Centre could boost cooperative federalism by avoiding mandating ‘One size fits all’ programmes for all States. “For instance, take the National Food Security Act. The Tamil Nadu government has already been doing much more than what the Food Security Act mandates,” he noted.

The notion of the ‘Council of States’ must be revived to make it more vibrant and functional. The State finance minister also called for profound reforms in Goods and Services Tax (GST).

DEVOLUTION

“I think GST is overtly ambitious in its scope and reach and has profound flaws in voting patterns, procedural norms on who gets to set the agenda, and how committees are formed among other things,” he said. Lastly, Rajan called for a ‘meaningful’ devolution to States, which requires rethinking the components of existing State and Concurrent lists. “It is unfortunate that States don’t have the powers of direct taxation. There is no other place in the world where only the Union has the income tax powers.”

He further added that devolution can’t be stopped with States alone; it has to be devolved down to local bodies.

“Financial incentivisation and direct transfer of funds to local bodies is the right thing to do, but currently, it goes to the State department in charge of local bodies, which is not an efficient way,” he added.