constituent assembly of india debates (proceedings)- volume vii

22. The problem before us is how to transfer from the Centre to the provinces, sufficient amount
which, while not placing too great a strain on the Centre, would provide adequate resources for the
inauguration of useful schemes of welfare and development by the Provinces. While the Centre, on its
present basis, may not be in a position to part with substantial sums, we fell that with the resolution of
its temporary difficulties and improvement in its tax administration, together with the levy and collection
of taxes evaded in the past, it can with no serious risk to its own budget part with sizable sums every
year. We are suggesting later in detail how these sums should be regulated. We have already referred to
the need for Provinces having clear priorities as between contending demands for money, and we have
no doubt that the Provinces will in the earlier years utilise the additional resources now placed at their
disposal by concentrating on schemes that would add to the productive capacity of the country and
consequently the income of the people and thus enable the provinces to embark on further schemes of
reform and development.
Claims of Provinces
23. Every Province has drawn pointed attention to the urgency of its programmes of social service
and economic development and to the limited nature of its own resources, both existing and potential,
and all of them have asked for substantial transfer of revenues from the Central sources. A summary of
the detailed suggestions made by them, which very considerably, is set out in Appendix III.
24. On the question of apportionment of income-tax among Provinces also, the provinces differ
widely in their views. Bombay and West Bengal support the basis of collection or residence, the United
Provinces that of population, and Bihar a combined basis of population and origin (place of accrual);
Orissa and Assam want weight age for backwardness. East Punjab, while suggesting no basis, wants her
deficit of Rs. 3 crores somehow to be met.
25. In the case of excise taxes, the bases suggested are production, collection, consumption and
population, while Assam suggests some weight age for its low level of revenue and expenditure. Assam
has further pressed for special treatment of excises collected on wasting assets, e. g., the petroleum
raised in Assam Assam also wants a share of the export duty on tea.
General Observations
26. Before we proceed further we would make a few general observations.
India has federal form of Government, and every federation is based on a division of authority and
involves a certain amount of compromise. In this country, federation has been the result of gradual
devolution of authority. It has not come into existence through agreements among sovereign States as
in some other federations.
27. What we have to do is to distribute the total available resources among Federal and Provincial
Governments in adequate relation to the functions imposed on each; so, however, that the arrangements
are not only equitable in themselves and in the interests of the country as a whole but are also
administratively feasible. We have also to ensure that there is not too violent a departure from the status
quo, and also to see that while we have as much uniformity as possible, weak Units are helped at least
to maintain certain minimum standards of services.
28. The basic functions of a Federal Government are Defence, Foreign Affairs and the service of the
bulk of the national debt, and they are all expensive functions, particularly in the light of the limited
resources of the country. The head "Communications" would ordinarily at least pay for itself. The Federal
Government may also have to assume leadership in the co-ordination and development of research and