Delhi full statehood: Fiscally arguable, politically impossible

A retired bureaucrat who served with the Delhi govt demystifies the narrative about the much-sought-after statehood for the capital, and concludes it may be well-nigh impossible

Shakti Sinha | July 2, 2016


#Shakti Sinha   #AAP   #Aam Aadmi Party   #Delhi Statehood   #Full Statehood   #Arvind Kejriwal   #Delhi government   #Delhi  


It seems Greece’s referendum on Grexit last year inspired Arvind Kejriwal to announce his intention to hold a referendum in Delhi on statehood. It is, therefore, no surprise that the unexpected positive vote for Brexit should lead him to bring back the issue of a referendum in Delhi to decide on ‘full statehood’, never mind the lack of constitutional provision or mandate permitting the same. Or that the constitution does not recognise any entity like a ‘half-state’ or ‘part-state’; it only recognises states or union territories. The National Capital Territory (NCT) of Delhi, like Puducherry, and earlier like Goa, Mizoram and Arunachal Pradesh, is a union territory (UT) with a legislature. Others like Chandigarh, Lakshadweep, Andaman and Nicobar Islands and Daman and Diu are UTs without legislature. These distinctions between these constitutional provisions are important but should not be over-read as Kejriwal has been doing since becoming the chief minister. 

COVER STORY | Dexit Dilemma

UTs without legislature have limited financial powers, and lacking their own public accounts, they do not have their own budgets and therefore no powers of taxation. Instead, their revenues and expenditures form part of the union budget, under the budget-head of the home ministry. UTs with legislatures have unlimited powers as long as they are generating their own resources. But because of this caveat, the budget presented by the government of the NCT of Delhi first needs a prior approval of the president, exercised by the home minister, before being presented to the Delhi legislative assembly. Going further, while the UTs without legislature have a single source of power, the Lt Governor (LG) who is the administrator, the elected government of Delhi has no control over police, law and order, land, etc. and even on other subjects. It can see its decisions being over-ruled by the combination of the LG and home ministry. Kejriwal has been railing against this since the beginning, demanding that his government be treated on par with that of other states since he, too, has popular mandate.

The present constitutional status of Delhi owes its origin to the 69th Constitutional Amendment Act that inserted special provisions under Article 239, providing for the proposed new administrative setup. Subsequently, parliament also enacted the Government of the National Capital Territory Act, 1991. Incidentally, the very title of Article 239 (‘administration of union territories’) establishes Delhi’s constitutional position unambiguously.

When the first elections to Delhi’s legislative assembly were held in 1993, the BJP swept to power; though the Congress party tried to claim credit for Delhi’s new status since it was a Congress-led union government that was responsible for the constitutional amendment and the Government of NCT Act. Madan Lal Khurana, elected leader of the BJP legislative party, staked his claim but unlike a state, since Delhi’s LG does not have the powers of a governor in this regard, it was the president who appointed Khurana as the chief minister. In fact, he had to be sworn in alone as the approval to appoint ministers was not received from the home ministry in time. They were sworn in the next day. An interesting fact is that other than for a short period in 1998 when there was a BJP government in Delhi and a BJP-led NDA government at the centre, for the rest of the 1993–2004 period, Delhi’s government was led by a party that was opposed to the party in power at the centre.

Yet, at no stage did different chief ministers, Khurana, Sahib Singh Verma or Sheila Dikshit, object to the system of functioning of centre-Delhi relations. Dikshit, in fact, expressed frustration that as the chief minister she did not have adequate powers since Delhi was not, to quote her, “a full-fledged state”.

There are two interesting, and relevant, aspects of this statement. One, she made it when her own party was in power at the centre, and not when she had to deal with Vajpayee’s government. Two, her objection was to the structure, and not to how it was in operation. She never claimed that she had powers to introduce legislative bills without prior approval of the president, to keep the LG out of the loop in decision-making including statutory appointments or the posting of senior officers and the like. Neither Khurana nor Verma objected to these arrangements or accused either the LG or the government of India of sabotaging their agenda when they exercised such powers. All three played by the book, however disadvantaged it placed Delhi’s popularly elected government. The problem, if any, is the constitutional structure as established by the 69th Constitutional Amendment and the Government of NCT Act.

This would lead to the next question: is statehood for Delhi politically and financially feasible?

Kejriwal’s demand for statehood seems unlikely to be politically acceptable. Successive union governments have considered statehood but none has accepted the demand. In fact, Delhi was ‘Part C’ state in the early 1950s with an elected chief minister, Chaudhary Brahm Prakash. Subsequently, this category was abolished and Delhi became a union territory. Notably, Brahm Prakash had considerable run-ins with the centre, though he was a Congressman. Later, Delhi had an elected metropolitan council, with a chief executive councillor and five executive councillors, a miniature version of what later became the government of NCT of Delhi. When the Narasimha Rao government moved the bill for an elected assembly in Delhi, it very consciously kept sensitive subjects like police, law and order and land under the government of India, signalling the limitations of administrative autonomy that the nation’s capital could enjoy. In fact, since Delhi became a chief commissioner’s province in 1912, being carved out of Punjab and United Provinces, these subjects have been exercised by the government of India. Clearly, even the British were not prepared to give their man complete autonomy, a feature we see in most national capital cities across the world.

The NDA under Vajpayee considered statehood for Delhi but general unease amongst union ministers about having to live and operate in a city where the police and municipal machinery was not under them was enough to sink the proposal. An alternative idea, pushed by Delhi BJP, was to give Delhi statehood but delink from it the NDMC area, where the central government is mostly located, so that it could remain a UT. But it did not find favour. One of the objections was that the airport would still lie outside the UT. There was also apprehension that members of parliament across party lines would not support statehood when it comes up in parliament. And unlike normal parliamentary bills requiring majority support, statehood to Delhi would require a constitutional amendment, backing by two-thirds of members of both houses, so cross-party support was a necessary condition for any movement on this score.

The problem of constitutional status and administrative arrangements of national capital cities is not unique to India. Washington DC became a self-governing city only in 1973, and its only representative in the US Congress is a non-voting member of the house of representatives, with no representative in the senate. In fact, its residents got the right to vote in US presidential elections only in 1961. Its budget is approved by the Congress and any law it passes can be over-ruled by the Congress. On the other hand, the police work under the city’s mayor, like all other cities in USA. Delhi’s elected government is far more favourably placed.

The mayor of Canberra functions as the chief minister of the Australian Capital Territory (ACT). There is no separate administrator, equivalent to LGs in Indian UTs, for ACT unlike other federal territories. However, laws passed by the Canberra assembly can be reversed by the Australian parliament; earlier this could be done administratively by the federal government. Another important point to note is that the functions of the ACT administration are limited to education and training, heath, economic development, environment and justice, far less powers and responsibilities than what Delhi’s elected government has.

In France, the Paris region comprising different municipalities is the equivalent of the NCT of Delhi. The delegate-general of the Paris region is part of the office of the president of France, like having Delhi’s LG as part of PMO with no elected chief minister. Even after France restructured its administrative system and the regions were given charge of land use, economic development, etc., the position of the Paris region did not change. The reason cited by the French government was that this was necessitated by the ‘special difficulties posed by the physical planning of the capital’. Quite similar to the reasons successive central governments in India have given for retaining control over land in Delhi. The police in France, in any case, have a centralised structure under the interior (home) ministry, with no local control of elected authorities.

Does Delhi make the cut as a state in fiscal terms? Due to its high per-capita income levels – three times the national average – and a combination of legal requirements, Delhi’s fiscal situation is highly satisfactory, with the government estimating a revenue surplus of Rs 5,543 crore in the current year (2016–17) – this figure is a likely overestimation, as will be seen explained. Its overall borrowings are low in terms of its gross state domestic product (GSDP), less than 8 percent. Critically, Delhi has a primary surplus, net of repayments, which is creditable. Successive governments make the case that though Delhi’s contribution of income-tax collections is next only to Mumbai, its share of divisible taxes is fixed at Rs 325 crore since 2001-02, whilst it should get a minimum of Rs 5,000 crore. And unlike states which have the option of monetising public lands to fund development projects, the Delhi government has to pay DDA for land for hospitals, bus depots, etc.

But the picture is not as one-sided as it seems. On the one hand, Delhi is ‘deprived’ of its share of central taxes and on the other, the government of India picks up the tab for Delhi police and civil service pensions. If the Delhi government had to pay for them, then even if its share of central taxes went up to Rs 5,000 crore, it would not be able to meet these commitments. Part of the shortfall could be met if it had ‘free’ access to public land, but would it be enough? In any case, DDA acquires land by making payment to land owners, so the total savings on this account would be lower.

It must also not be forgotten that Delhi’s comfortable public finances that allowed it to invest heavily in institutions of higher learning, large public hospitals, flyovers and elevated roads, etc., flew out of large saving to the exchequer from privatisation of power distribution, approximately Rs 30,000 crore. This has been run down and rising subsidies to power consumers have reversed these gains. Lastly, last years’ primary surplus was helped by a steep increase in VAT collections; this year’s primary surplus target is '2,000 crore lower but based on an equally large increase in VAT collections, which is highly questionable.

In short, while a fiscal case for statehood for Delhi is arguable but not conclusively so, politically it would be near impossibility. n

Sinha is the head of policy research group at the Bureau of Research in Industry and Economic Fundamentals (BRIEF). He was a private secretary to prime minister Atal Bihari Vajpayee, and later a finance secretary in Delhi government.

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