Vedanta and the missing spirit of federalism
There was a time when railway ministers were accused of favouring their home states while launching new trains in railway budgets. Those memories came rushing back when Anil Agarwal’s Vedanta Ltd decided to house its proposed semiconductor joint venture unit in Gujarat despite Maharashtra apparently providing the company with a better deal and an ideal ecosystem for manufacturing. Speculation is rife that intervention from New Delhi forced the last-minute change in favour of Gujarat. Impassioned arguments by Vedanta and its promoter Anil Agarwal to dispel those notions notwithstanding, they haven’t managed to put a lid on the issue yet.
The controversy again brought forth troubling questions over growing fissures in Centre-state relationships. Till now, strains in the relationships were visible only in non-BJP states. That changed as in the Vedanta case, one BJP-ruled state was favoured over another. Given that the Central government has always promoted healthy competition among states, speculation that the Centre is taking projects from other states to Gujarat are not a good endorsement of cooperative federalism. Mumbai had earlier lost out to Gandhinagar in Gujarat in establishing an international financial services centre (IFSC). When in 2007 the Percy Mistry Committee had recommended setting up IFSC on the lines of Singapore, the then Prime Minister Manmohan Singh had apparently proposed Mumbai to house it. But after a change in government at the Centre in 2014, Gift City Gandhinagar was favoured in place of Mumbai. As the Gift City continues to attract foreign and domestic financial institutions with favourable tax laws and easier compliances, many fear Mumbai may lose out to Gandhinagar in the long run.
Centre-state relationships have been awkward ever since the implementation of GST. They worsened recently as the period for compensation promised to states under the GST ended in 2022. There are other issues as well. The latest is the debate over freebies. The prime minister terming freebies offered by some state governments as ‘revdi culture’ led to an eruption of protest by some states—particularly Tamil Nadu and Delhi. It is not that the Centre and states have not fought in the past during previous regimes. But recent events indicate the spirit of cooperative federalism is sorely missing. Merely paying lip service to it cannot be the way forward.