UNIT-I

PUBLIC SYSTEMS MANAGEMENT

UNIT-I - INTRODUCTION
 Meaning, Definition, Scope and Significance of Public Systems.
 Public Policy Formation, Implementation and Evaluation.
 Centre – State Relations, Regional Disputes.
OVERVIEW

INTRODUCTION:
Public administration both as a practice and a discipline is undergoing change in view of
contemporary global developments in the socio-economic arena. The current globalization
trends have led to a rethinking about the role of the State and government. Approaches to public
administration are also embedded in wider conceptions of the State, the relationship between State,
market and civil society. The market model of governance has been emerging since 1980s. Public
administrators are now viewed by many as entrepreneurial managers whose job is to attain cost
effectiveness. They are expected to be more entrepreneurial and result-focused. In this context, the
concept of public systems has added a new dimension to the structure and system of working of
public administration. Public systems management is a developing theme lending a new
dimension to the discipline of public administration. In this Unit, an attempt is made to explore
the evolution, nature, scope and characteristics of Public Systems Management (PSM).

MEANING AND DEFINITION:

Public system is broad term encompassing the constitutional, legal, institutional and
conventional arrangements by which, the country is governed, and especially the means by which the
policies of the Government are formulated, and then implemented by State sector organizations, and
the means by which those organizations are governed, funded, managed and monitored.

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 A system, according to Gore and Stubbe (1994), is a “combination of resources working
together to convert inputs into outputs”. Every organisation comprises systems with certain
goals to fulfil, converting inputs into provision of goods and services. For example, it can be
personnel, finance, logistics, marketing systems and so on. Public systems management, broadly
speaking, comprises several sub-systems operating in the public arena. Each of the sub-systems
aims at achieving certain prescribed goals through utilisation of resources – human, financial
and material. Public systems management operates within a broad framework of rules, regulations,
catering to the needs of the public and making use of public finance.
The public domain or system has certain distinct characteristics and functions to
discharge and operates within a prescribed framework. Hence it cannot totally accept the private
sector principles and styles of operation. As we have discussed, globalisation over the past twenty
years, had a significant impact on public systems. The neo liberal views, public choice perspective
have resulted in the roll back of the State from key areas, and led to quasi markets, separation of
policy from execution, professional administration, etc. Public systems, still, function within the
domain of State, law, and politics and pursue the public interest. Attempts to equate business and
public administration, under the name of public management reform, signify conservative
mistakes of not distinguishing the different logics that govern the private and public realms. Public
management reforms draw inspiration from business management where decision-making
autonomy is enjoyed by the managers of companies. Nevertheless, the difference between public
administration and business administration, derived from the different nature of private and public
organisations, needs to be made clear. There are two basic differences. First, the business
organisation has definite owners and seeks profit, while the public organisation belongs to everyone
and pursues the public interest. Second, the private company is governed or coordinated by the
market, which falls within the scope of economic theory, while the State particularly the
democratic State goes by the logic of democratic politics, which is analysed by political science
and public law (Pereira, 2004, emphasis added).
Public systems management, it can be said is concerned with the designing and
operation of public services and the functioning of executive government. This sort of a reform
attempt of State bureaucracies seeks to make government more ‘business like’ providing a
prominent role for bureaucrats as managers.

SCOPE OF PSM:
Contemporary governments are attempting to be performance-oriented. Therefore,
management of government needs to be deregulated. The nature of public agencies must be
entrepreneurial, mission-driven, and service-oriented. Public systems managers are to be risk-
takers who invite participation of other kindred organisations for partnering and reward
performance. In this scenario, the scope of public systems management is confined to following
areas of governance:
 Focusing on achieving results rather than primarily conforming with processes
 Introducing market principles such as competition, contracting out in the provision of
goods and services
 Making public administration customer-driven to enhance service ethic and efficiency
 Assigning the role of steering activities to the government rather than rowing, relying on
third parties such as non-profit organisations, other levels of government in implementation
of policies
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  Deregulating the government activities to make it result-oriented
 Empowering the employees to serve the customers as it promotes teamwork
 Changing the overall public administrative culture towards flexibility, innovation,
entrepreneurialism, as ‘opposed to’ rule-bound, process orientation and focusing on inputs
rather than results; and
 A new entrepreneurial, user-oriented culture is being created in public systems, with
emphasis on performance measurement, autonomy to organisation and freedom to
individuals.
Kettle (2002), points out certain basic concerns that the New Public Management initiatives
address. These include:

Productivity
How can governments produce more services with less tax money?

Marketisation
How can governments use market – style incentives to root out the pathologies of government
bureaucracy?

Service orientation
How can governments better connect with citizens to make programmes more responsive to the
needs of the citizen?

Decentralisation
How can governments make programmes more responsive and effective by shifting programmes to
lower levels of government or shifting responsibility within public agencies to give front line
managers greater incentive and ability to respond to the needs of citizens?
Policy
How can governments improve capacity to devise and track policy?

Accountability for results

How can governments improve their ability to deliver what they promise?
PSM is intended to realise the above concerns in practice. Its scope is to project
customer choice as the public choice through enhancing the effectiveness of public services based
on many of the private sector principles and practices. The focus is more towards achieving
managerial decentralisation of governance, performance and results orientation, and
citizens’/consumers’ satisfaction.
SIGNIFICANCE OF PUBLIC SYSTEMS IN INDIA

India adopted planned economic development where the State and private capital were required
to actively participate in accelerating the development process. Immediately after independence, the
Government of India announced its Industrial Policy in April 1948. The aim was to have a mixed
economy where Public Sector and Private Sector were expected to operate side by side. In pursuance
of this, industries were classified into four categories as follows:

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 • Exclusive monopoly in Arms and Ammunition, Atomic Energy and Railway Transport;

• Government controlled new undertakings in Coal, Iron and Steel, Telephone, Telegraph,
Aircraft, and Shipbuilding, etc.;

• Basic consumer and capital goods industries under State Regulation and Control; and

• Other industries under co-operative and private enterprise. This Policy also underlined the
role of cottage and small industries and of foreign capital in industrializing the Indian
economy.

This policy remained in operation for eight years but could make little impact on the industrial
scene of the country because the First Five year plan was modest, especially with regard to
investment in the Industrial Sector.

In April 1956, the Government of India announced a new Industrial Policy which was
necessitated by certain important economic and political development in the country; the adoption of
constitution of India in 1950 enunciating the Directive Principles of State Policy; the successful
completion of the First Five Year Plan; the acceptance by the Parliament of the Socialist Pattern of
Society in December 1954; and the launching of the Second Five Year Plan with emphasis on
industrialization.

Industrial Policy Resolution of 1956

The industrial policy resolution laid down the following objectives of the Industrial Policy,
which have since been incorporated in all the Five Year Plans of the country.

• To accelerate the growth rate of the economy;

• To speed up industrialization;

• To expand public sector;

• To develop heavy, basic and key industries;

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 • To build co-operative sector;

• To reduce disparities in income and wealth;

• To undertake State trading on an increasing scale; and

• To develop and build new undertakings and set up new transport facilities by the State.

In pursuance of these objectives industries were classified into three categories as follows:
1. First 17 industries were kept in Schedule A. These are the exclusive responsibility of the
State. They included Arms and Ammunition, Atomic Energy, Iron & Steel, Heavy
Machineries, Coal, Oil, Power, Rail Transport, etc.

2. Second 12 industries were kept in Schedule B. These would be progressively State owned
and the Private Sector will also supplement the effort of the State either singly or with State
participation. They included Aluminum and other Non-Ferrous Metals, Chemicals, Drugs,
Pharmaceuticals, Fertilizer, Road and Sea Transport, etc.

3. Development of all the remaining industries in schedule C was left to the initiative and
enterprise of the private sector.

It could be observed from above that the Indian Parliament resolved to maintain exclusive
monopoly of the State in respect of development of the following Public Systems:

1. Rail Transport

2. Road Transport

3. Water Transport

4. Air Transport

5. Electric Power Generation, Transmission and Distribution

6. Post and Telegraph

In accordance with the industrial policy resolutions 1956 the task to build a Cooperative Sector
was incorporated in all the Five Year Plans for fulfillment. Before constitutional amendment of 1976,
education was the exclusive responsibility of the States. The constitutional amendment as above
included education in the concurrent list. Public Health remained the responsibility of the State. Thus
at independence in 1947, Public Systems in India were the exclusive monopoly of the Government.

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PUBLIC SYSTEMS MANAGEMENT: NATURE
Over the years, different forms of political and administrative systems and methods of
governance have been focusing on the ways to reconcile the interests of the citizens with that of
the role of the State. The emergence of the concept of public systems management in public
administration has added a new dimension to the whole issue of governance. Public systems
management has been considered by many as “administration and management of both direct and
indirect institutions engaged in the public policy making exercise and in delivery of public
services”. It is a style of management, which emphasises output targets, limited term contracts,
monetary incentives and freedom to manage. The focus of the PSM is on results, efficiency and
measurement. It brings the following changes in the functioning of public organisations viz.
i) There is a greater flexibility in tailoring the organisation to circumstance, instead of
necessarily following a rigid Weberian model
ii) The focus is on results.
iii) Greater attention is paid to strategic planning
iv) Private sector personnel practices have been adopted such as paying more for good
performance or less for poor performance.
PSM propagates managerial pursuits in governance, with a focus upon the following:
 Steering role of the government instead of direct provision
 Concern on results and outcomes
 Orientation to the needs of customers, and
 Use of market mechanisms in those activities of public sector which cannot be privatised.

PUBLIC POLICY FORMATION, IMPLEMENTATION AND EVALAUTION:

Public policy is the principled guide to action taken by the administrative executive
branches of the state with regard to a class of issues, in a manner consistent with law and institutional
customs. Public policy is the means by which a government maintains order or addresses the needs of
its citizens through actions defined by its constitution. If this definition sounds vague or confusing, it's
likely because a public policy is generally not a tangible thing but rather is a term used to describe a
collection of laws, mandates, or regulations established through a political process.

FORMULATION OF PUBLIC POLICY

 What is Public Policy?

 No single definition
 It is what Governments Say and Do or Do Not
 “A Public Policy is a plan of action undertaken by government to achieve some broad
purpose affecting large segment of the citizenry”.

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PUBLIC POLICY PROCESS

Scope of Public Policy

1. Range is immense

2. Expansion of government activities into many areas

3. Protecting health, safety of workers and consumers

4. Reduction of pollution from automobiles, sewage, industrial and agriculture wastes

5. Developing housing and recreational activities

6. Preserving land and property for aesthetic or ecological value

7. Eliminating inequality, etc.

Stages in Public Policy Formulation

1. Agenda Building (an issue gets the attention of government)

2. Policy Formulation / Policy decision (interested party fights for it & Govt. authorities action)
3. Policy Implementation (Govt. enforces the policy)
4. Policy Evaluation (judgments are made about the policy’s effectiveness)

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1.Agenda Building :

A. How issues get on to the Policy Agenda?

INITIATING ISSUE AGENDA

FACTOR

1. Pollution Control

Charismatic Leader Agenda

2. Employment, WTO

1. Dangerous Smog
2. Oil Spill
Dramatic Crisis Agenda
3. Nuclear Secrets Leak
4. Natural Calamities

1. Threat of Global Competition

Interest Group
2. Privatization Agenda
Pressure
Ex.PSU employees strike

1. Testing nuclear weapons

Media focus on 2. Iraq War Agenda
protest/demonstration 3. Ecological Disaster

1. Plant Closings
2. Cost of Govt. Regulations
Political Leadership Agenda
Ex.US-China trade sanctions on
nuclear issues

A. Policy Agenda
1. All problems that exist in society do not transform into political issues
2. All issues do not produce policies
3. All policies do not invite implementation
4. All implementations do not affect the society in the manner intended
5. There is a limited amount of time, money and personnel to handle policy
problems and issues must compete for a position in the agenda

A. Identifying the Problem

1. Political culture of citizens and policy makers, including their benefits, values
and attitudes towards behavior and conditions in the world, affects how they see
problems

2. Orientation to time differs from culture to culture in ways that influence the
perception of problems. Ex. Capitalist society identifies its friends and enemies
differently than socialist one

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B. Measuring the Symptoms / Extent of Problems
 Crime Statistics
 Unemployment
 Breakdown of Law and Order
 Racial Discrimination
 Poverty
 Inadequate Educational System
 Wars / Military Actions (Ex. Russia Vs. US Missile Defense System)

C. Limiting the Range of Agenda Issues

 Lack of sufficient resources to take up new issues
 Co-opt the leaders of the group making undesirable demands by giving
positions in some agencies (It silences the problem temporarily). Ex. Creation of
Telangana state by Dr. Chenna Reddy, Former governor of TN.
 Force is used against activists.
 Creating favourable image.
 Delaying tactics

POLICY FORMULATION / DECISION (POTENTIAL CRITERIA)

A. Public Opinion

1. Public opinion – democracy – elected representatives

2. Factors that influence public opinion
 Letters to the editor
 Direct contact with authorities
 Obscured mails
 Speech, rallies, demonstrations, protests
 Civil disorders and riots
3. Reception of public opinion - General tendency to screen communications to
distort meanings
4. Public opinion does not serve as the determining criterion for policy
decisions:
a) Voting – voters must have opinions on policies
b) Opinions on policy (favored candidate). Most voters do not have time,
expertise or inclination to think extensively about most issues
c) No knowledge about candidates stand
d) Alternatives offered (better among the worst)
e) Voter turnout
f) No voting on the basis of issues
g) No public opinion polls
h) Scattered interest groups (lack face to face communication)
5. Result of the above actions - Opinions and policies are frequently incongruent
6. Policy makers at central and state level are at higher ‘Socio-economic’ status.
Therefore, insensitive to the experiences of people of lower status
7. The generation gap between citizens and policy makers
8. Conflict of Interest
a) Economist – Improved standard of living
b) Ecologist – Depletion of non-renewable resources
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B. Influence of Policy-Makers on Public Opinion
1. Policy-makers initiate as well as receive opinion
2. Sometimes public demand for a policy is actually the result of work by policy-
makers
3. Public depends on government officials for information
4. Reports from scientific laboratories operated by Govt. make major stories. Govt.’s
monopoly on foreign policy
5. Major decisions of the courts are announced in an elaborate ritual – devised to impress
the media and the public
6. Policy-makers are not passive recipient’s stimuli, but they seek to shape public
opinions. Sometimes go to extreme length to obtain political support
7. This aggressive action by policy-makers reduces the already limited role of public
opinion in influencing policy decision
8. Political executives (PM/CM) frequently attempt to influence public opinion
through speech over TV, radio, written presentations or press conferences.
C. Constitutional Limits of Public Policy

The fundamental “Law of the land” limits the public’s influence on making policy –
Public Interest

D. Decision Making Rationality

1. Identify a problem
2. Measure the symptoms / extent of problem
3. Clarify and rank goals
4. Assessing alternatives
a) Predicting consequences of policy alternatives
b) Policy experiments
c) Long and short-run consequences
d) Matching consequences and goals
5. Collection of all relevant options for meeting the goals
6. Predict the consequences of each alternative and assess them
7. Select the best alternative

E. Options and Information from the Bureaucracy

1. Primary source of information is bureaucracy
2. Information passes from bottom to top
3. Subordinates paint the situation & sometimes do not report at all

F. Standard Operating Procedures ( SOPs)

Most departments use routines or SOPs to gather and process information in a
methodical fashion. Because of
1. Constraint of time
2. Ignorance of available information
3. Secrecy
4. Personal characteristics of bureaucrats and elected officials
5. Making inferences based on selected indicators

G. Economic Constraints on Decision-Making

1. Level of economic development
2. Monetary Policy

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3. Fiscal Policy – Govt.’s borrowing and taxation
4. Regulatory Policies of FIs (Financial Institutions)

H. Political Constraints on Decision-Making

1. Political Feasibility - Opposition party’s good policies
2. Political Culture (values and beliefs). Ex. Fighting in the Assembly
3. Bargaining and Compromise
4. The weight of history on public policy (traditional approach to policy matters)
5. The constitution
6. Committed Resources – previous commitment of existing resources
I. How Policy-Makers Cope?
1. No public opinion
2. Rationality is used (But rely on decision rules – Rules of thumb or standard
operating procedures - SOPs)
3. Decrease the pressure of considering alternatives
4. Occasionally engage in innovation. The following are the reasons for the same:
a) Aggressive Leadership
a) Professionally oriented bureaucracies
b) Sharp public demands
c) The development of new technologies (it is believed that 2.5 million tones
of Helium-3 is available on lunar surface which will be enough to meet the
energy needs of earth for 10,000 years)
d) Replication of other department’s innovative and successful policy
J. Policy Formulation / Decision-Making Rules
1. Instrumentalism
2. Shifting public opinion
3. Innovations from bureaucracy
4. New resources ( Ex. Usage of moon’s natural resources by U.S, Russia and others)
5. International events
6. Crises
POLICY IMPLEMENTATION

A. Communication Gap
 Communication is often inadequate
 Unclear Transmission of message
 No Clarity – vagueness in policies
 Inconsistency
 Insufficient Resources, information and personnel

B. Implementation Gap – Managing Public Policy In India

 Disposition of implementers. (Ex. Public interest)
 Lack of incentives to achievers.
 Ineffectual bureaucratic routines
 Interests that are not satisfied with policies of legislature, executive or
judiciary, work to shape policy to satisfy their own desires by maneuvering to
control its implementation
 Diversity and pluralistic nature of society amidst free press
 Conflicting demands made by different groups through a vast network of
communications
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 Institutions involved range from all branches of govt., the executive, legislature
judiciary and a host of non-governmental institutions, associations, interest
groups, political parties, academic bodies and individuals
 Inadequate research
 Origin of public policy – election manifestoes
 Ideological preferences of senior officials. This facet of official behavior is
neglected to research
 Interpretation of public interest. Administrators have enormous power to use this
concept. It is vaguely defined.
 Clash of ego between a politician and a bureaucrat
 Outlook differs – demoralizing bureaucracy. Bureaucrat blames political
leadership for introduction of irrational criteria in implementation.
 Urgency plays a less effect or neutral role of ego.
 The task of preserving a stable balance between political and career official is a
continuing source of difficulty in framing good policy.
Observation on Policy Formulation and Implementation

1. Govt.’s in developing countries often formulate broad sweeping policies

2. In western (developed countries) policies tend to be incremental. But, in
developing countries they are ambitious, sweeping, designed to bring about
development and social reform, creating new pattern of actions and institutions, in
the process generating tensions.
3. There is more politics in formation and more administration in execution of it.
4. Overlapping policy decisions
5. Lack of knowledge among Bureaucrats & Politicians
6. Lack of quality research
7. Play-it-safe role
8. Neutrality between best and worst (bureaucracy)
9. Indian bureaucracy has been politicized and exercised more powers in reality
than the law permitted.
10. National planning commission – predominant
11. Planning cells in key ministries
12. P.M constitutes number of committees to seek advice. (Ex. Economic policy
advisory committee-most influential)
13. Indian political parties tend to research at the time of elections
14. Bureaucrats play a major role in definition, development and
implementation of policy.

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CENTRE-STATE RELATIONS
Indian constitution defines the power distribution between the federal government (the Centre)
and the States in India. This part is divided between legislative and administrative powers. The
legislative section is divided into three lists: Union list, States list and Concurrent list (Wikipedia,
2011).

The power of the states and the Centre are defined by the constitution and the legislative powers
are divided into three lists.

Union List
Union list consists of 99 items on which the parliament has exclusive power to legislate with
including: defense, armed forces, arms and ammunition, atomic energy, foreign affairs, war and
peace, citizenship, extradition, railways, shipping and navigation, airways, posts and telegraphs,
telephones, wireless and broadcasting, currency, foreign trade, inter-state trade and commerce,
banking, insurance, control of industries, regulation and development of mines, mineral and oil
resources, elections, audit of Government accounts, constitution and organization of the Supreme
Court, High Courts and union public service commission, income tax, custom duties and export
duties, duties of excise, corporation tax, taxes on capital value of assets, estate duty, terminal taxes.
(Wikipedia, 2013)
State List
The state list consists of 61 items and individual states have exclusive authority to legislate on items
included in this list: Public order, police, administration of justice, prisons, local government, public
health and sanitation, agriculture, animal husbandry, water supplies and irrigation, land rights,
forests, fisheries, money lending, state public services and state Public Service Commission, land
revenue, taxes on agricultural income, taxes on lands on buildings, estate duty, taxes on electricity,
taxes on vehicles, taxes on luxuries. (Wikipedia, 2013)
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Concurrent List
Concurrent list consists of 52 items. Uniformity is desirable but not essential on items in this list:
Marriage and divorce, transfer of property other than agricultural land, education, contracts,
bankruptcy and insolvency, trustees and trusts, civil procedure, contempt of court, adulteration of
foodstuffs, drugs and poisons, economic and social planning, trade unions, labour welfare,
electricity, newspapers, books and printing press, stamp duties. (Wikipedia, 2013)

Exceptions
Though states have exclusive powers to legislate with regards to items on the states list, articles
249, 250, 252, and 253 state situations in which the federal government can legislate on these
items.[2]

Administrative Powers
The Union and states have independent executive staffs fully controlled by respected governments
and executive power of the states and the Centre are extended on issues they are empowered to
legislate.

Union Control Over States

According to the Article 356 of the Constitution of India, states must exercise their executive power
in compliance with the laws made by the Central government. Article 357 calls upon every state
not to impede on the executive power of the Union within the states. Articles 352 to 360 contain
provisions which empower the Centre to take over the executive of the states on issues of national
security or on the breakdown of constitutional machinery. Governors are appointed by the Central
government to oversee states. The president can dissolve the state assembly under the
recommendation of the council of ministers by invoking Article 356 if and when states fail to
comply with directives given by the Centre

Centre – State Relations:

1. Legislative Relations
2. Administrative Relations
3. Financial Relations
4. Planning and Centre-State Relations
1. Legislative Relations (Articles 245 – 254 in the Constitution of India)
 Exclusive jurisdiction of Union Govt. to make laws for whole India on Union List
 States will have exclusive jurisdiction of for State List Subjects
 Both the Union and State Govt. can make laws on Concurrent List
 In case of clash between the Governments, Union Laws will prevail
 Residuary Power of the Union Govt. (powers not enumerated in any of the three lists)

Exceptions to the State List: Special Circumstances:

1) Legislation in National Interest (Art. 249): If Rajya Sabha declares a resolution by not less than
2/3rd majority, Union Govt. Can makes laws on State List
 Resolution remains in force for one year which can be extended by subsequent
resolution

2) Legislation by consent of States (Art. 252)

 If two or more states request by passing a resolutions in both the houses of each state,
Union Govt. can make laws to apply for them
 Parliament has right to amend or repeal such Act.
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1) Legislation to implement International Treaties (Art 253)
 Only Union Govt. Can make laws for whole country to implement international treaty,
agreement, convention made at any international conference, association or other body.

2) Legislation under proclamation of emergency (Art. 352)

 State list is automatically converted into Concurrent List
 Emergency in India was between 1962-68 & 1971-1977.
 In the US, Canada or Australia, the above provision is not there

3) Legislation due to failure of Constitutional Machinery in the State (Art. 356)

 President’s rule is imposed on the report of a Governor
 The powers of state legislature are under the Parliament
 This power is used more than 100 times in almost all states

4) Reservation of Bills for the consideration of the President (Art.200)

 Bills which endanger the position of High Courts, should be reserved for President
 Inter-state River or River Valley bills (Art. 288)
 Some bills on Concurrent List may be reserved
5) Legislative Relations and Courts – ͞Incidental Powers͟
 Legislature is given plenary power to make on laws a particular subject and also
implied power to make laws incidental to the exercise of such power.
 Example: Make law to establish special factory – plenary power; rules for
functioning special factory – incidental powers

Conclusion:
 Tendency towards high degree of centralization
 Different political parties may have different political programs leading to
conflicts
 Reservation of bills for the President by State Governor may lead to conflict
center-state relations

2. Administrative Relations (Articles 245 – 254 in the Constitution of India)

Administrative Relations serve two purposes:
1) Effective federal Executive Control
2) Minimize the conflicts between Centre and States

I) Governor as Agent of Centre

 Governor works as the representative of the President of India
 Governor is appointed, transferred and dismissed by the President
 Governor’s role is dual – (Firstly, representative of Union Govt. And
Secondly, Constitutional head of the State)

II) Implementation of Central Laws (Art.256):

 Executive powers of every state shall be so exercised as to ensure compliance with
laws made by Parliament.
 Executive power of Union Govt. to give directions to State
 Not to impede of prejudice the executive power of union in the State
 With respect to military, railways or such other areas of national importance, center
will direct the State
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 Entrust the Officers of the State certain functions of the Union
Govt.(Expenditure, if any incurred shall be borne by the Centre)
 Centre can give directions on the welfare of Scheduled Tribes in the State.

III) States to entrust functions to the Union Govt. (Art. 258A):

IV) All India Services:
a. Common to both the Centre and States (Art.312 gives more powers to center to create
such services):
b. Recruitment to the above services is made by UPSC-Central Personnel Agency
c. These services are regulated by central rules and regulations
d. These services give cohesions to the federal structure

V) Power of Adjudication:
 Parliament can adjudicate on inter-state water or River issues

VI) Inter-State Comity

 Recognition of Public Acts, judicial settlements or disputes
 Freedom of Trade & Commerce
 Full faith and credit shall be given to the Judicial proceedings, acts, records, of
States and Union Govt. throughout the country
 States are no way connected with the appointment or removal of Judges of the
Supreme Court and High Courts

VII) Inquiry Commissions against State Chief Ministers:

 Central Govt. Is empowered to appoint commissions of inquiry against any Chief
minister on the charges of corruption and malpractices

VIII) Constitutional Bodies / Instructional arrangement for consultation:

 National Development Council – an important body for consultation
between the Centre and States
 Its organization members includes:
1)Chief Ministers of States
2)Heads of UTs
3) Union Cabinet Ministers
4) Prime Minister (Chairman of the Council)

IX) Planning Commission:

 PM is the ex-officio Chairman
 Involves Centre and States

X) Consultations through Conferences:

Network of consultations between the Centre and States through:
1. National Development Council
2. The CMs conference
3. Conference of Ministers of different departments
4. Chief Secretaries
5. Director General of Police etc.

XI) Conclusion: (Assessment of Constitutional Provisions)

 The Constitution establishes supremacy of the Centre over the States
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 The Govt. Of India appointed Sarkaria Commission in 1983 to review the
Centre-State Relations which submitted its report in 1988.

3. Financial Relations (Articles 245 – 254 in the Constitution of India)

 Constitution does not give clear distinction between the Centre and States to
distribute financial resources and leaves much scope to the centre to decide.
 Financial relationship is probably the most complex in Centre-State Relations.
 There is Constitutional provision to appoint Finance Commission by the President every
five years to solve various financial disputes between Centre and the States

Scheme of distribution of Sources of Revenue:

i) Taxes exclusively assigned to the Union Govt. by the Constitution.
 Income from Customs, Export & Import Duties, Income Tax, Excise Duties on
Tobacco, Jute, Cotton etc.,
 Corporation Tax,
 Income from Railways & Postal Departments

ii) Taxes exclusively assigned to States:

 Income from Land Revenue
 Stamp Duty,
 Taxes on goods and passengers on road or inland water ways
 Vehicles tax,
 Toll taxes on lands and buildings
 Professional tax,
 Taxes on luxuries, entertainment, amusement parks, betting and
gambling

iii) Taxes levied by the Union Govt. but collected and appropriated by the States:
 Stamp duties on Bills of Exchange, Cheques, Promissory Notes, Bills of
Lading, Letters of Credit,
 Policies of Insurance,
 Transfer of Shares

iv) Taxes levied and collected by the Union Govt. but assigned to States:
 Duties on succession of property
 Taxes on railway freight and fares
 Taxes on transaction in stock exchanges and commodity market
 Newspapers, advertisements

v) Taxes levied and collected by the Union Govt. but shared with States:

Grants-in-Aid:

 Article 275 empowers the Parliament to give financial assistance to states:

 Grants are classified as
i) Plan – These grants are determined by the Planning Commission
ii) Non Plan – Finance Commission determines these
iii) Grants on Adhoc – are given by the Central Govt. For unforeseen
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situations.

Power of Borrowing:
 Union Govt. Can borrow within and outside upon the security of revenues
 States can borrow within the country

Financial emergency:
 During financial emergencies, the president can suspend the the provision of division
of financial resources between the Union and States and Grantsin-Aid to States
 The Union Govt. Acquires right to issue directions to States on
- Reduction of Salary and Allowances, including High Court Judges
- Reserve all money Bills passed by State Legislatures

Control by the Comptroller and Auditor General of India:

 Comptroller and Auditor General of India appointed by the President
 Shall maintain and audit the accounts of the Union and States
 Can direct States to keep records in a particular manner

Areas of Conflict:
 Many States complain untimely release of funds
 Release of funds depends on the audit of accounts which is dependent on central Govt.
 Central assistance for central schemes is communicated late – leads to delay in
implementation of schemes
 Centrally sponsored schemes impose conditions – some are difficult ones
 Procedural requirements delay release of funds
4. Planning and Centre-State Relations (Articles 245 – 254 in the Constitution of India)
 India adopted Economic Planning after Independence to achieve maximum
development
 Planning Commission plays important role in Centre-State Relations
 Almost in every activity of States, Planning Commission involves for State Plans
(including State List Subjects)
 Planning Commission:
i) fixes the size & priorities for the State Plans
ii) mobilizes the physical and financial resources
iii) reduces inter-state disparities in development
iv) ensures uniform rate of economic growth and social development in States

REGIONAL DISPUTES

Regional disputes are bound to arise in a vast country of more than 120 crore population:
Reasons:
1. Secularism & Democracy: leading to practice any religion and float new political
parties

2. India is a sub-continent: vast nation with minor to major differences in

climate, geography, religion, culture - need area specific
policies (single political party with common agenda may
not be able to address the needs of the whole nation)

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3. Imbalanced Regional Development:
a. Industrially well-developed states versus others
b. Public welfare schemes – better in South India
c. Concentration of I.T. and Automobile Industries
d. Literacy levels

4. Inheritance of colonial geographic regions after independence of India: Example-

a. Pondicherry merged in India in 1954
b. Goa
c. Jammu & Kashmir
d. Others

5. Regional Political Parties:

a. Strong regional parties have more cabinet ministers in union government and get
more industries and investment in their state and create more regional
imbalances

b. Power Politics: New & existing leaders desperately look to get political power
and in this process promoting regional cultural issues such as language – Marathi
&Tamil

6. International Conflicts:
a. Border issues with China and Pakistan – lead to permanent internal
conflicts in North Eastern States and Jammu Kashmir
b. LTTE & Tamilnadu’s support for Tamils’ cause
7. International Terrorism:
a. Internal ideological and physical support
b. Internationally uneven development of nations lead poor people to turn to religious
fanatics
8. Scare Natural Resources: Water, Minerals etc

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PUBLIC SYSTEM—A SERVICE PROVIDER

It follows from above that management of Public Systems requires specialized competence for
its social acceptance and commercial viability.

The Public System is basically a service provider industry. To make such services customer
friendly and socially acceptable; the price and quality should be acceptable to the users. The services
offered should be safe, secured, and reliable for its acceptance by the society. Reliability of a product
and/or services originates from quality. These criteria demand innovation in Public Systems
Management (PSM). The products are required to be suitably designed for all market segments for
satisfaction of respective customers.

This is also likely to maximize revenue collection within administered prices. Quality, safety
and security of services lead to reliability. Reliable services demand use of field tested proven
technology in designing and building the infrastructure and its regular and scientific maintenance.
The number of users of a Public System normally increases with time. When a Public System is first
made available for public use, the masses generally takes time to use such new facility changing their
earlier habits and behaviour pattern. However, with passage of time such behavioural pattern
gradually changes and the people start using the new Public System.

In the premises of such consumer behaviour pattern, the capacity of the newly constructed
Public System and its efficiency gradually reduces over time because of depreciation arising out of
seasonal climate changes, even if the facilities remained unused or partially used. In absence of a
scientific maintenance management, the capacity and reliability of services from such Public
Systems deteriorate rapidly when people get accustomed to use such services. Thus maintenance, up-
keep, modernization and innovation are essential for PSM.

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