Article 275 of the Indian Constitution: Grants-in-Aid to Certain States

Article 275 of the Indian Constitution addresses the crucial issue of financial assistance provided by the Union government to states. Recognizing the diverse economic realities and developmental needs across the country, this article empowers Parliament to allocate grants-in-aid to states that are deemed to be in need of financial support. Furthermore, it makes specific provisions for funding schemes aimed at promoting the welfare of Scheduled Tribes and developing Scheduled Areas, highlighting the Constitution’s commitment to inclusive growth.

Original Text

(1) Such sums as Parliament may by law provide shall be charged on the Consolidated Fund of India in each year as grants-in-aid of the revenues of such States as Parliament may determine to be in need of assistance, and different sums may be fixed for different States:

Provided that there shall be paid out of the Consolidated Fund of India as grants-in-aid to the revenues of a State such capital and recurring sums as may be necessary to enable that State to meet the costs of such schemes of development as may be undertaken by the State with the approval of the Government of India for the purpose of promoting the welfare of the Scheduled Tribes in that State or raising the level of administration of the Scheduled Areas therein to that of the administration of the rest of the areas of that State:

Provided further that there shall be paid out of the Consolidated Fund of India as grants-in-aid to the revenues of the State of Assam sums, capital and recurring, equivalent to—

(a) the average excess of expenditure over the revenue during the two years immediately preceding the commencement of this Constitution in respect of the administration of the tribal areas specified in Part A of the table appended to paragraph 20 of the Sixth Schedule; and

(b) the cost of such schemes of development as may be undertaken by that State with the approval of the Government of India for the purpose of raising the level of administration of the said areas to that of the administration of the rest of the areas of that State.

(1A) On and from the formation of the autonomous State under article 244A, -

(i) any sums payable under clause (a) of the second proviso to clause (1) shall, if the autonomous State comprises all the tribal areas referred to in that clause, be paid to the autonomous State, and, if the autonomous State comprises only some of those tribal areas, be apportioned between the State of Assam and the autonomous State as the President may, by order, specify;

(ii) there shall be paid out of the Consolidated Fund of India as grants-in-aid to the autonomous State such sums, capital and recurring, as may be necessary to enable that State to meet the costs of such schemes of development as may be undertaken by that State with the approval of the Government of India for the purpose of raising the level of administration of that State to that of the administration of the rest of the State of Assam.

(2) Nothing in this article shall be deemed to be a grant within the meaning of article 270.

Detailed Explanation

Article 275 is a crucial component of the fiscal federalism framework of India, allowing the Union Government to provide financial assistance to states in need.

Clause 1: This clause forms the core of the article.
- It allows Parliament to legislate and provide grants-in-aid to states from the Consolidated Fund of India.
- The determination of which states are “in need of assistance” rests with the Parliament.
- Parliament can specify different amounts for different states based on their specific needs.
First Proviso to Clause 1: This highlights the special focus on Scheduled Tribes and Scheduled Areas.
- It mandates grants-in-aid to states for development schemes approved by the Government of India aimed at:
  - Promoting the welfare of Scheduled Tribes.
  - Raising the level of administration in Scheduled Areas to match the rest of the state.
Second Proviso to Clause 1: This includes special provisions for Assam.
- It focuses on financial assistance to the State of Assam related to the administration of tribal areas mentioned in Part A of the table appended to paragraph 20 of the Sixth Schedule (pre-constitutional arrangement).
- It ensures funding for development schemes to improve the administration of those areas.
Clause 1A: This was added by the Constitution (Twenty-Second Amendment) Act, 1969, and deals with autonomous states under Article 244A.
- It details how grants-in-aid will be disbursed if an autonomous state is formed within Assam.
- It allows for apportionment of funds between Assam and the autonomous state or direct payment to the autonomous state depending on the territorial composition of the autonomous state.
- It provides grants to the autonomous state to raise its administrative level to that of the rest of Assam.
Clause 2: This clarifies the distinction between grants under Article 275 and the sharing of taxes under Article 270 (which was repealed by the 80th Amendment Act, 2000 and now referred to Article 280 (Finance Commission)). This prevents double-counting and ensures proper financial management. It implies grants under Article 275 are outside the divisible pool of taxes.

Detailed Notes

Empowerment of Parliament:
- Parliament determines which states are in need of assistance.
- Parliament decides the amount of grants-in-aid to be provided.
- The grants are charged on the Consolidated Fund of India, implying they are a mandatory expenditure.
Focus on Scheduled Tribes and Scheduled Areas:
- Specific grants are earmarked for promoting the welfare of Scheduled Tribes.
- Grants aim to raise the administrative standards in Scheduled Areas.
- These schemes require approval from the Government of India.
Special Provision for Assam:
- Grants were allocated to Assam for the administration of specific tribal areas as per the Sixth Schedule before the Constitution.
- The aim was to bring the administrative level of these tribal areas on par with the rest of the state.
Autonomous States under Article 244A:
- Addresses the financial arrangements following the creation of autonomous states within Assam.
- Specifies the distribution of grants-in-aid between Assam and the newly formed autonomous state.
- Ensures adequate funding for the autonomous state to improve its administration.
Distinction from Tax Sharing:
- Clarifies that grants under Article 275 are distinct from the sharing of tax revenue between the Union and the States.
- Grants under Article 275 are not part of the divisible pool of taxes.
Constitutional Amendment:
- Clause (1A) was inserted by the Constitution (Twenty-Second Amendment) Act, 1969, to accommodate the creation of autonomous states within Assam.

Additional Comments

The Finance Commission plays a crucial role in recommending the principles governing grants-in-aid under Article 275.
The grants provided under this article are intended to address vertical imbalances (between the Union and the States) and horizontal imbalances (among the States).
Article 275 is instrumental in promoting balanced regional development and social justice.

Summary

This constitutional article empowers the Union Parliament to provide grants-in-aid to states deemed financially needy, drawing funds from the Consolidated Fund of India. Differentiated allocations are permissible based on specific state requirements. It emphasizes welfare initiatives for Scheduled Tribes and administrative development in Scheduled Areas, mandating government-approved schemes. Special provisions initially addressed tribal administration in Assam, later extending to autonomous states within Assam, ensuring equitable financial distribution. This article clearly distinguishes these grants from the divisible tax pool, as governed by the Finance Commission’s recommendations.