Vol. 6 · pages 291–295

276 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES Bengal … … 19 ths90 United Provinces … … 18 ths90 Punjab … … 9 ths90 Burma … … 6 ths90½ Central Provinces and Berar 5 ths90 Assam … … 2 ths90½ (19) In cases of emergency the Local Government of any Province may be required by the Governor-General in Council, with the sanction of the Secretary of State, to pay to the Governor-General in Council a contribution for any financial year in excess of the amount required by the preceding rules in the case of that year. Two more matters had to be settled in order to make the separation between Provincial and Central Finance as complete as possible. Both were connected with capital transactions. One was the question of the Provincial Loan Account. This Account represented the fund from which a Provincial Government advanced agricultural loans, loans to indebted landholders, to municipalities and other local bodies, etc. The capital was provided by the Government of India as required and was returned to it as it was repaid. The province paid the Government of India interest on the average capital outstanding in each year, recouping itself by higher rates of interest which were supposed to compensate it for bad debts. It was commonly agreed that it was the natural result of the Reforms Scheme that the Provinces should for the future finance their own loan transactions, and that joint accounts of this nature between them and the Government of India should be wound up as quickly as possible. The matter was referred to the Financial Relations Committee and on the basis of its recommendations in that behalf it was provided by Rule 23 of the Devolution Rules that: “ Any moneys which, on the 1st day of April 1921, are owed to the Governor-General in Council on account of advances

277 THE NATURE OF THE CHANGE made from the provincial loan account of any Province shall be treated as an advance to the Local Government from the revenues of India, and shall carry interest at a rate calculated on the average rate carried by the total amount owed to the Governor-General in Council on this account on the 31st March 1921. The interest shall be payable upon such dates as the Governor-General in Council may fix. In addition, the Local Government shall pay to the Governor-General in Council in each year an instalment in repayment of the principal amount of the advance, and this instalment shall be so fixed that the total advance shall except where for special reasons the Governor-General in Council may otherwise direct, be repaid before the expiry of twelve years. It shall be open to any Local Government to repay in any year an amount in excess to the fixed instalment.” The other was the question of responsibility for capital expenditure on irrigation works. In this as in the matter of Provincial Loan Account it was agreed that it would be incompatible with the scheme of complete separation of Provincial Finance to hand over to the former the control of irrigation works and to make the latter responsible for the capital transaction incurred thereon. Hence the rule 1 that: (1) The capital sums spent by the Governor-General in Council upon the construction in the various Provinces of productive and protective irrigation works and of such other works financed from loan funds as may from time to time be handed over to the management of Local Governments shall be treated as advances made to the Local Governments from the revenues of India. Such advances shall carry interest at the following rates, namely : (a) In the case of outlay up to the end of the financial year 1916-17, at the rate of 3.3252 per centum. (b) In the case of outlay incurred after the financial year 1916-17, at the average rate of interest paid by the Governor-General in Council on loans raised in the open market since the end of that year. (2) The interest shall be payable upon such dates as the Governor-General in Council may fix. 1 Devolution Rule 24.

278 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES Thus was broken the financial and administrative strand which tied the Provincial Governments to the Central Government and prevented the introduction into them of responsible government. As the Provinces thereby acquired “an acknowledged authority of their own” over the services and sources allocated to them it followed that they should have the freedom to borrow in their own name, which was denied to them heretofore. Consequently the Local Government Borrowing Rules’ made under the Reforms Act provided that subject to certain conditions : 2 “A Local Government may raise loans on the security of the revenues allocated to it for any of the following purposes, namely: (a) To meet capital expenditure on the construction or acquisition (including the acquisition of land, maintenance during construction and equipment) of any work or permanent asset of a material character in connection with a project of lasting public utility, provided that: (i) the proposed expenditure is so large that it cannot reasonably be met from current revenues, and (ii) if the project appears to the Governal-General in Council unlikely to yield a return of not less than such percentage as he may from time to time by order prescribe, arrangements are made for the amortization of the debt; ( b) to meet any classes of expenditure on irrigation which have under rules in force before the passing of the Act been met from loan funds ; ( c) for the giving of relief and the establishment and maintenance of relief works in times of famine or scarcity ; 1 Rules under Section 2 ( 2) of the Government of India Act, 1919. 2 The rules required that: (1) No loan shall be raised by a Local Government without the sanction (in the case of loans to be raised in India) of the Governor-General in Council, or (in the case of loans to be raised outside India) of the Secretary of State in Council, and in sanctioning the raising of a loan the Governor-General in Council or the Secretary of State in Council, as the case may be, may specify the amount of the issue and any or all of the conditions under which the loan shall be raised. (2) Every application for the sanction of Secretary of State shall be transmitted through the Governor-General in Council.

279 THE NATURE OF THE CHANGE ( d) for the financing of the Provincial Loan Account; and ( e) for the repayment or consolidation of loans raised in accordance with these rules or the repayment of advance made by the Governor-General in Council.” With the cutting off of the financial and administrative strand there remained only the legislative strand which had so far debarred the growth of provincial autonomy. This legislative strand, as was pointed out before, operated through the principle of requiring previous sanction and subsequent assent of the Government of India. By the rules made under the Reforms Act a field has been marked off for the free exercise of the Legislative powers of the Provinces in which that principle has been dispensed with. So far as the field of tax legislation was concerned it was provided 1 that: “The Legislative Council of a Province may, without the previous sanction of the Governor-General, make and take into consideration any law for imposing for the purposes of the Local Government any tax included in Schedule I.” This schedule comprises the following heads of taxation :— 1. A tax on land put to uses other than agricultural. 2. A tax on succession or acquisition by survivorship in a joint family. 3. A tax on any form of betting or gambling permitted by law. 4. A tax on advertisements. 5. A tax on amusements. 6. A tax on any specified luxury. 7. A registration fee. 8. A stamp-duty other than duties of which the amount is fixed by Indian legislation. In the matter of non-tax legislation the procedure adopted by the rules has been slightly different. In tax legislation the rules stated in what cases previous sanction was not necessary. In non-tax legislation the rules required in what cases previous sanction was necessary. The effect of this difference in the 1 Rules under Section 10 (3) (a) of the Government of India Act, 1919, Scheduled Taxes Rules.

280 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES requirements of the rules of previous sanction’ was that while in matters of tax legislation a Provincial Government could only levy certain named taxes, in the matter of non-tax legislation it could do anything provided it did not infringe certain laws. The reasons for this difference are obvious. A widening of the basis of provincial taxation means a narrowing field for imperial taxation. Such a detrimental effect could not flow to the Government in the matter of non-tax legislation, be the non-tax legislative powers of the Provinces howsoever large. The taxing power to be granted to the Provinces had therefore to be more strictly circumscribed than the grant of legislative power. None the less it cannot be denied that the rules regarding previous sanction sufficiently loosened the legislative strand as to permit of the Provinces being autonomous in theory as well as in practice. This autonomy is well reflected in the new Budget Procedure in the Provinces. Under the old regime the Provincial Budgets had to be passed by the Finance Department of the Government of India, the Provincial Accounts to be supervised by the Accountant-General and audited by the Controller and Auditor-General of the Government of India and appropriation reports submitted to the Finance Department of the Government of India. All this is changed under the new regime. The Provincial Budget, instead of being passed by the Finance Department of the Government of India, is framed by the Finance Department constituted in each Province under the Reforms Act 2 and is voted item by item by the Provincial Legislature. 3 The accounts of the Provinces still continue 4 to be supervised and audited by the 1 Rules under section 10 (3) (L) of the Government of India Act, 1919, Local Legislature Previous Sanction rules. It should, however, be noted that if a Provincial Bill is such that it does not require previous sanction it does not follow that it can become law under the above rules because it has been assented to by the Provincial Legislation. For, by virtue of another set of Rules made under section 12 (1) of the Government of India Act, 1919, called Reservation of Bills Rules, it is provided that the Governor of a Province must reserve some and may reserve other Bills for the subsequent assent of the Governor-General before declaring them law even if the Bills be such as to require no previous sanction. 2 For the constitution and functions of the Finance Department of the Provinces, see Part III of Devolution rules made under Section I of the Government of India Act, 1919. 3 See Rules 25 to 32 of the Rules of Business for Provincial Legislative Councils made under Section 11 (5) of the Government of India Act, 1919. 4 Rules framed under Section 96D (1) of the Government of India Act.