Lesson 32 of 76 7 min Premium

Inter-State Relations and Cooperative Federalism

GS2 · Federalism and Centre–State Relations

Why inter-state relations matter

A federation works only if its units cooperate. India's Constitution provides for: adjudication of inter-state water disputes (Article 262), coordination through Inter-State Councils (Article 263), mutual recognition of public acts, records and judicial proceedings (Article 261), and freedom of inter-state trade, commerce and intercourse (Articles 301–307). Outside the Constitution, Parliament created Zonal Councils (1956), and the North Eastern Council (1971).

Inter-state water disputes (Article 262)

Parliament may by law provide for adjudication of disputes over the use, distribution or control of waters of inter-state rivers and river valleys, and may exclude the jurisdiction of the Supreme Court and other courts. Two laws were passed in 1956:

River Boards Act, 1956 – for boards to regulate and develop inter-state rivers (no board has ever been set up under it).
Inter-State River Water Disputes Act, 1956 – the Centre sets up an ad hoc tribunal when a state requests and negotiations fail. The award is final and binding (after the 2002 amendment it has the force of a Supreme Court decree), and the Supreme Court has no original jurisdiction over the dispute. However, the Supreme Court can hear appeals by special leave under Article 136 against tribunal awards, as it did in the Cauvery case (2018), where it modified the 2007 tribunal award, increased Karnataka's share and directed a scheme – the Cauvery Water Management Authority – to be set up.

Tribunals set up so far include: Krishna (1969, and a second in 2004), Godavari (1969), Narmada (1969), Ravi and Beas (1986), Cauvery (1990), Vansadhara (2010), Mahadayi/Mandovi (2010) and Mahanadi (2018).

Problems: long delays (the Cauvery tribunal took 17 years), non-compliance with awards, lack of reliable data, absence of a permanent body, and politicisation. The Inter-State River Water Disputes (Amendment) Bill, 2019 proposed a single permanent tribunal with benches and a Disputes Resolution Committee for negotiation within a fixed time, but has not been enacted.

The Inter-State Council (Article 263)

The President may establish an Inter-State Council if it appears that the public interest would be served. The Sarkaria Commission recommended a permanent council, and the Inter-State Council was set up in 1990 by presidential order. Its composition: the Prime Minister (chairman), Chief Ministers of all states, Chief Ministers of UTs with legislatures, administrators of other UTs, Governors of states under President's rule, and six Union Cabinet ministers (including the Home Minister) nominated by the PM. It is a recommendatory body to investigate and discuss subjects of common interest and make recommendations for better coordination. It is supposed to meet at least three times a year, but has met only rarely – the 11th meeting in 2016 was the first in a decade. A Standing Committee chaired by the Home Minister handles continuing consultations. Experts argue that a more active Inter-State Council would reduce Centre–state friction.

Zonal Councils

Statutory bodies created by the States Reorganisation Act, 1956, on Nehru's suggestion, to promote inter-state cooperation. There are five: Northern, Central, Eastern, Western and Southern. Each is chaired by the Union Home Minister; members are the Chief Ministers of the states in the zone, two other ministers from each state, and the administrators of UTs. The vice-chairman is a Chief Minister of the zone, by rotation. They discuss economic and social planning, border disputes, linguistic minorities, inter-state transport and matters arising from reorganisation. They are advisory.

Map of India colouring states by Zonal Council – Northern, Central, Eastern, Western, Southern – and the North Eastern Council — Each Zonal Council is chaired by the Union Home Minister; island UTs are special invitees in the Southern/Eastern councils.

The North Eastern Council was created by a separate Act in 1971 for the eight north-eastern states (Sikkim added in 2002). Since 2018 the Union Home Minister is its chairman and the Minister of DoNER its vice-chairman. It acts as a regional planning body.

Inter-state trade and commerce (Articles 301–307)

Article 301 declares that trade, commerce and intercourse throughout India shall be free. Exceptions: Parliament can impose restrictions in the public interest (Article 302), but cannot give preference to one state over another except in a situation of scarcity (Article 303); a state legislature can impose reasonable restrictions in the public interest, but a bill for this needs the President's previous sanction (Article 304(b)), and states can tax goods imported from other states as long as they do not discriminate (Article 304(a)). GST, by creating a single market with no inter-state check-posts, has given practical effect to Article 301.

Cooperative and competitive federalism

Cooperative federalism means the Centre and states share a horizontal relationship and work together for common goals. Instruments: the Inter-State Council, Zonal Councils, the GST Council (the best working example – joint decision-making by weighted votes), the Governing Council of NITI Aayog (the PM, all Chief Ministers and Lieutenant Governors), centrally sponsored schemes co-funded by both, and joint institutions like the National Disaster Management Authority.

Two cards contrasting cooperative federalism and competitive federalism with examples — The goal is "competitive cooperative federalism" – collaboration on rules, competition on results.

Competitive federalism means states compete with one another (and the Centre with states) to attract investment and improve governance. NITI Aayog and ministries publish rankings: Ease of Doing Business / Business Reform Action Plan rankings (DPIIT), the SDG India Index, the School Education Quality Index, the Health Index, the Export Preparedness Index and the Aspirational Districts Programme rankings. The aim is "competitive cooperative federalism".

Sources of tension:

Role of Governors – delays in assent to bills, discretion in government formation (see the State Government module); the Tamil Nadu (2025) judgment on time limits for assent.
Fiscal issues – cesses and surcharges outside the divisible pool, GST compensation ending in 2022, borrowing limits and conditional grants.
Deployment of central agencies (CBI needs general consent of states under Section 6 of the DSPE Act, 1946; several states withdrew consent) and central armed police forces.
Centrally sponsored schemes in state subjects with uniform design and branding conditions.
Delimitation after 2026 and the use of population as a criterion – concerns of southern states.
Language policy and the three-language formula in the NEP 2020.

Commissions on Centre–state relations:

Administrative Reforms Commission (1966) – Centre–state relations study team; recommended an Inter-State Council and non-partisan Governors.
Rajamannar Committee (1969) – appointed by Tamil Nadu; called for greater state autonomy.
Anandpur Sahib Resolution (1973) – Akali Dal's demand for autonomy.
Sarkaria Commission (1983–88) – 247 recommendations: permanent Inter-State Council, Article 356 as a last resort, Governor to be an eminent person from outside the state and not active in politics, retention of All-India Services, consultation with states on Concurrent List legislation. The Inter-State Council (1990) was its main outcome.
Punchhi Commission (2007–10) – fixed five-year tenure for Governors and removal only by state legislature resolution; "localised emergency" under Articles 355 and 356; a time limit of six months for the Governor to decide on bills; consult states before using Article 253 on State subjects; and restricting Governors' role as university chancellors.

Practice: Mains question

*"Cooperative federalism has worked better in fiscal matters than in political ones." Discuss with examples. (250 words)* Fiscal: GST Council consensus, Finance Commission devolution, joint pandemic response; political: Governor–state frictions, central agencies, Article 356 history, delays in assent. Suggest institutional fixes: regular Inter-State Council meetings, Punchhi Commission recommendations, codifying conventions for Governors, and a mechanism for disputes on cesses and borrowing.

Common traps

Inter-State Council: constitutional provision (Art 263) but created by presidential order (1990); Zonal Councils: statutory (1956 Act).
Zonal Councils are chaired by the Union Home Minister; the Inter-State Council by the PM.
Water tribunal awards: Supreme Court has no original jurisdiction, but can hear appeals under Article 136.
Freedom of trade (Art 301) can be restricted by states only with the President's previous sanction (Art 304(b)).

⚡ Quick revision

Art 262 water disputes: ISRWD Act 1956; River Boards Act 1956 (no board); Cauvery SC 2018 → CWMA
Art 263 Inter-State Council (1990): PM chairs; CMs + 6 ministers; recommendatory; rarely meets (2016)
Zonal Councils: 5, SR Act 1956, Home Minister chairs; NEC 1971 (Sikkim 2002)
Arts 301–307 free trade; Art 304(b) needs President's sanction
Cooperative (GST Council, NITI Governing Council) vs competitive (rankings) federalism
Commissions: ARC 1966, Rajamannar 1969, Sarkaria 1983–88, Punchhi 2007–10

The constitutional provision that lets Parliament create a mechanism to settle disputes between states over inter-state rivers and to bar courts from hearing such disputes; tribunals under the Inter-State River Water Disputes Act 1956 do this work.An enabling Article that lets the President, by order, create councils to inquire into disputes between states, study subjects of common interest and recommend better coordination of policy; the 1990 Inter-State Council is the best-known body, but several sectoral councils also rest on it.Five statutory regional councils created under the States Reorganisation Act 1956 to promote cooperation among neighbouring states and Union Territories; each is chaired by the Union Home Minister.India's apex court under Articles 124–147; guardian of the Constitution and final court of appeal. Full coverage: The Supreme Court: Composition, Appointment and Jurisdiction.The Article that gives the Supreme Court discretionary power to grant special leave to appeal from any judgment, decree, order or sentence of any court or tribunal in India, except military tribunals.A peninsular river that rises at Talakaveri in the Brahmagiri hills of Kodagu, Karnataka, flows south-east across the Mysuru plateau and Tamil Nadu, and enters the Bay of Bengal through a large, fertile delta, often called the Ganga of the South.A constitutional forum under Article 263, set up in 1990 on the Sarkaria Commission's advice, where the Prime Minister, Chief Ministers and Union ministers discuss Centre–state and inter-state issues.The first major commission on Centre–state relations, set up in 1983 under Justice R. S. Sarkaria; its 1988 report favoured a strong Union with cooperative federalism and recommended limits on Article 356 and a permanent Inter-State Council.Redrawing of state boundaries on linguistic lines, notably under the States Reorganisation Act 1956. Full coverage: Linguistic Reorganisation of States.The Article that lets state legislatures tax goods from other states on a non-discriminatory basis and impose reasonable restrictions in the public interest on trade within or with the state, provided the Bill has the President's prior sanction.A comprehensive, destination-based indirect tax on the supply of goods and services, introduced in India on 1 July 2017, that replaced most central and state levies with a single system in which tax paid on inputs is credited against tax on outputs.A system of government in which power is constitutionally divided between a central government and regional governments, each supreme in its own sphere. This hub page connects the many forms of Indian federalism; see the linked lessons for depth.

Register free to keep reading