Support for Security-Related Expenditure of State Governments through Central Finance Commission

For the past few years, funds for security-related expenditure (SRE) of many state governments, particularly of Jammu & Kashmir and the north-eastern states, are being provided by the Government of India. At present, the SRE support is significant to the above-mentioned states and also, of late, to the states affected by Maoist violence.

The maintenance of law and order is a subject that falls within the ambit of state governments as per the State List or List-II reflected in the Seventh Schedule of the Constitution. However, considering the imperatives of overall national security, the ramifications of the activities of anti-national forces in certain sensitive parts of the country, and pursuant to its residuary responsibility to ensure an appropriate level of overall national security, the Centre has during the past two decades considered it prudent to fund the SRE of state governments.

The allocation is worked out in the Revenue budget of the Union Ministry of Home Affairs (MHA) as grant-in-aid. The earmarked state governments initially incur the expenditure as per the agreed list of objects/activities, and then obtain reimbursement from the Centre, with the expenditure audited subsequently by Internal Audit authorities of MHA and Accountants General of the states incurring the expenditure.

Paucity of financial resources with the state governments has apparently been the reason for the Central Government to step in. State governments had demanded financial support from the Centre, and the latter started funding SRE expenditure from the Union budget but after striking a normative bargain with the state governments. The Centre has been funding the SRE selectively within the ambit of a memorandum of understanding evolved between itself and the state governments covering certain broad areas such as the raising of India Reserve Battalions (IRBs – police battalions under the control of state governments for deployment on special purposes), equipping the state police forces in respect of communication systems and stores, operational vehicles and weapons. At the same time, expenditures on police stations and concomitant housing facilities have also been permitted to be incurred under capital expenditure by the state governments from funds reimbursed under the SRE category. In other words, the purpose of SRE funds has been to provide the state governments with facilities that enable them to discharge their role effectively through their police forces, with regard to maintaining an adequate level of internal security of the state and its people against forces inimical to the nation that are operating with more incisiveness and lethality in the backdrop of brewing socio-cultural tensions in parts of the country as well as based on support from across the national border. SRE funds are not meant to cover normal maintenance and establishment expenditure. Even in the case of new raisings of IRBs, Central support is only meant for their initial period of recruitment – training and equipping.

There is a view that supporting the state governments over extended periods through funds for SRE only makes them excessively dependant on the subjective decisions of the Union Government. For example, the Tripura government had at one stage held the grievance that some states were being provided more funds than others owing to political considerations. Further, such support also undermines the Constitutional framework and erodes the state governments’ autonomy. Notwithstanding this view, the fact remains that except for a few states, most state governments would be constrained to divert a part of their resources from development schemes to fund the upgradation and modernisation of their police machinery. There is, therefore, a strong case for providing special allocations for SRE (which is under the Non-Plan segment of the budget) as grants-in-aid through the statutory devolution process within the scope of recommendations of the Central Finance Commissions constituted every five years under the provisions of the Constitution.

The Finance Commissions are mandated to recommend the total share of states from the divisible pool of funds to be raised by the Central Government, the inter-se distribution of the states from the total share for the states, and grants-in-aid from the divisible pool to the states as per specific requirement on certain programmes and state-specific needs. The 14th Finance Commission (FFC) has been constituted under a Presidential Notification issued on 2 January 2013 to obtain recommendations on the allocations covering the award period 2015-2020. The SRE component has reached a substantial threshold – it has been of the order of approximately Rs. 1000 crore annually (this is the SRE component catered for in the Union Budget 2012-13 under grant-in-aid for the north-eastern states, Jammu & Kashmir and for the Maoist violence-affected states, taken together). The SRE component, if provided as grant-in-aid and as a Central devolution within a statutory framework to the state governments, would go a long way towards relieving the latter’s dependence on the Centre as well as be harmonious to their autonomy of functioning reckoning that internal security is within the domain of responsibility of state governments.

The Centre also deploys a large component of central paramilitary forces like the CRPF, BSF, SSB and Assam Rifles not only on operations but also on static-installations` security duties at sensitive establishments (and not necessarily at Central establishments only) and places in the states. There is a case to devolve such responsibilities entirely on the state police forces, which are adequately equipped and motivated. A statutorily mandated transfer of funds for SRE expenditure to the state governments would empower them and make them more responsible in the matter of dealing with internal security while enabling the Centre to concentrate its resources on the Central paramilitary and make them more effective and oriented towards their original role of selective critical interventions. The state governments may, therefore, consider projecting their claims before the FFC for a Central devolution to fund their SRE expenditure, and the FFC should respond favourably and institutionalise this process.

Gautam Sen is ex-Additional CGDA and presently Adviser to a north-eastern state government.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.