Vol. 6 · pages 216–220

201 THE NATURE OF PROVINCIAL FINANCE the expenditure which it retains under its own control, and it hands the rest over to Local Governments, with the obligation to meet out of it certain necessary expenditure.... But it cannot bind itself to this proportion for ever, because the calculation must necessarily be a rough one, and is liable to be vitiated by unforeseen failure of resources, or growths of charges, whether in the share of financial administration which it retains or in that which it delegates. An examination of the appropriation and a readjustment of it in any particular found necessary are indispensable. A surrender of the right to this would be analogous in its nature and effects to the Permanent Settlement of Bengal.” Although anxiety was expressed for the provinces the revisions were primarily conducted in the interests of the Imperial Government as the resumptions incontrovertibly proved, and the Permanent Settlement was delayed because the Government of India did not desire to relinquish its control over its revenues. Under the quinquennial settlement the usufruct was permitted to be undisturbed for five years only. But how tentative was this surrender, which, even for five years, was looked upon as highly impolitic by the Secretary of State,1 was proved by the Government of India, which did not take back to exercise its inherent right to resume the usufruct of its revenues at any time it liked as is indicated by the not too uncommon levies or benevolences, as they were called, which it forced upon the provincial balances. Not even the Permanent Settlement can be interpreted to mean that the revenues settled upon the different Provinces became their revenues in anything like a legal sense, for in the eye of the law all revenues including those provincialized still remained the constitutional possession of the Government of India. Whether the Government could have effected a legal separation by ivesting itself of the revenues of India in favour of the Provinces is doubtful. The Parliamentary enactment which vests the revenues of India in the Government of India had limited the legislative powers of the Government of India by a clause which prevented it from “making any laws or Regulations which shall in any way repeal, vary, suspend or affect any of the provisions of this Act (of 1833).... or the Prerogative of the Crown or the Authority of Parliament.” 1 Cf. Despatches to the Government of India No. 51, dated February 16, 1882, and No. 208, dated July 6, 1882.

202 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES At least it is significant that it has required an Act of Parliament to do so. But the Government of India had not made any legal separation of the title to the revenues, and if it could have done that by its own law it could have undone it as well. Nor can it be said that the separation of Provincial revenues involved separate possession. If the Provincial Governments had been allowed to establish their own treasuries to receive the collections from Provincialized revenues, then Provincial revenues in the sense of separate possession could have had a meaning. But by the rules, Provincial Governments were not to deposit their funds elsewhere than in the treasury of the Imperial Government. Consequently the possession of the revenues remained in the hands of the Government of India and the disbursement from the provincial revenues was carried out from the Imperial Treasury by the officers of the Imperial Government. None the less, the view was hard to die. But such an erroneous view was never more confidently stated than by the Honourable Mr. Sayani, and never more forcibly controverted than by Sir James Westland in a passage-at-arms between the two on the occasion of a Budget debate in the Council Hall of the Government of India from which the following is reproduced :— The Honourable Mr. Sayani said :— “The whole theory underlying the system (of Provincial Finance) is that the revenues of the country, far from belonging to the Provinces which raise them or being available for their own requirements.... constitute a common fund to be absolutely at the disposal of the Central Government, out of which it is to dole out what amount it pleases for provincial services.” Catching the condemnatory tone of these comments, the Finance Minister, Sir James Westland, rose to say :— “The Honourable Mr. Sayani, if I correctly followed him, stated that the arrangements of the Government of India were made upon the theory that the revenues were not the revenues of the separate Provinces and were not applicable to the expenditure of the several Provinces, but were the revenues of a common fund, the Local Governments being merely the agents of the Government of India for their realization. I think he mentioned the theory in some words like these, only for the purpose of condemning it. Well, I wish to assert that theory in the most positive manner I can. The revenues are the revenues of the Government of India—its Constitutional Possession. The Government of India is a body created by Act of Parliament, and

203 THE NATURE OF PROVINCIAL FINANCE if reference be made to that Act of Parliament it will be seen that the revenues of India are the revenues of the Government of India and of that Government alone. Every action that the Local Government takes in respect of them must be justified by a specific order of the Government of India; the Local Governments derive their powers entirely from the Government of India, and apart from that Government they exercise no financial powers whatsoever.” 1 Again, if the financial relationship between the Central and Provincial Governments in India were based upon the principle of separation of sources and contributions from the yield, what ought to have been shown was the existence of legal responsibility of the Provinces for the services they administered. It is true there was a certain division of functions between the Central and Provincial Governments in India analogous to what existed between the Central and State Governments in most of the federal countries. But it must, however, be remembered that this division of functions had no sanction in law and no legal responsibility attached to the provinces for any of the services, not even for those provincialized. The entire responsibility by law rested on the shoulders of the Imperial Government and it could not absolve itself of that responsibility by transferring it on to any of the Provinces. That the Provinces accepted the financial responsibility for some of the Imperial services was their choice. That they could not be compelled to undertake them was proved in a singular manner by Madras refusing to accept such responsibility in 1877. By law it was thus the Government of India which was responsible for peace, order and good government in the country. All services were therefore necessarily Imperial in status undertaken by the Government of India in discharge of its constitutional obligations. It is therefore obvious that the view which posited that the relationship between the Central and Provincial Governments in British India was one of separation of sources and contributions from the yield was an untenable view. The Government of almost every country in these days is carried on by an inter-related group of polities operating in specific areas and discharging specific public functions ; and it may well be that in any two given countries the number of polities engaged in carrying on the work of government is the same. But it is quite erroneous to argue from that fact that the nature of their inter-relationship must have been alike. It is therefore as well to invite attention to the point that the ordered 1 Financial Statement, 1897-8, p. 110, etc.

204 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES relationship between such inter-related polities depends upon which of them is the law-giving polity. It will be granted that in such group of polities there is one that is supreme in the sense that from a variety of reasons mostly historical it is competent to give law to the other polities. In federal countries it is the State Governments which are the law-giving polities. They occupy a pivotal position. They are the depositories of sovereign powers original as well as residuary. They can claim independent existence, have their own resources and discharge their own functions. The Federal Government, on the other hand, is the creature of the State Governments. It can have no powers and no functions other than those which the States have been pleased to transfer to it by an act of self-abnegation. It is therefore truthful as well as becoming to speak of the financial relationship between the State and Federal governments as one of separation of sources and contributions from the yield. 1 For there the States have their separate resources which they lawfully own and can therefore be spoken of as surrendering their revenues to make contributions to the Central Government after paying for their own services. But the same was inconsistent with the position of the Provincial Governments. Far from pivotal, the Provincial Governments formed the weakest entities in the group of administrative polities functioning in India. Up to 1833 the Provinces had separate rights to surrender in a foedus and had the government of India been then organized on a federal basis the position of the Provinces would have been very much the same as those of the States in federal countries. But with the establishment of the Imperial system by the Act of 1833 the last chance of creating a federation in India vanished. By that Act the sovereignty of the Provinces was so entirely crushed that no trace was left of it to permit of a truly federal element ever to enter into their relationship with the Central Government. Since that Act the government of the country has been entrusted to a single authority charged with the sole responsibility for the good government of the country. As no single administration could support the Atlantean load of governing such a vast country with the help of central bureaux, great powers were delegated to the Provincial Governments. But this must not obscure the fact that they were literally the 1 Of course, it is not necessary that there should be a federal system. A legalized system of decentralization will be equally compatible with separation of sources and contributions from the yield.

205 THE NATURE OF PROVINCIAL FINANCE “agents of the Government of India.” Common usage had elevated the term “Provincial” to a proud position. Along with Provincial Revenues it had been usual to speak of Provincial Services, Provincial Civil Servants, Provincial Courts, etc., as if all these and other things constitutionally belonged to the Provincial Governments. But the usage was full of irony. For, when one recalls the provisions of the constitutional law of the land, so far from thinking of them as Sovereign authorities one felt inclined to say that notwithstanding their high-sounding apparatus of Governors and Councils it was not appropriate to call them Governments. In any case the Provincial Governments had no legal powers or functions which polities designated as Governments have been known to possess. The fact is the Indian system of polity was diametrically opposed to the federal system of polity. It was a centralized system in which there was nothing Provincial; what appeared to be Provincial was but the regional aspect of the Imperial. It was therefore untruthful and overbecoming to speak of the financial relationship between the Provincial and Central Governments in India as being one of separation of sources and contributions from the yield. For here the Provinces had no separate resources which they lawfully owned, and could not therefore be spoken of as surrendering their revenues to make contributions to the Central Government after paying for what may be supposed to have been their own services—a supposition rigorously excluded by the law of the constitution. If the complex code of limitations discussed in the last chapter had the effect, which it was not unreasonable to expect, of revealing the true nature of Provincial Finance, such a view as the one herein criticized could never have prevailed. That notwithstanding the existence of these limitations there should have been men who instead of wondering as to what remained of Provincial Finance when it was regulated by such limitations, argued with the confidence of the ignorant that the system was independent in its organization, is itself a proof that in their study of Provincial Finance the study of its limitations formed no part. Otherwise a reference to that code would have shown that if the Provinces had separate revenues and separate services they would have had powers of alienating whatever revenues they liked, of spending on any service they desired, of framing their Budget Estimates with