The fiscal architecture of Indian federalism rests not only on the Finance Commission but also on cesses, surcharges and Centrally Sponsored Schemes. With reference to the 15th Finance Commission and the rising CSS share, examine the autonomy of States.

Introduction:

State fiscal space rests on three constitutional flows — Article 280 Finance Commission devolution under Articles 270 and 275, Article 282 grants for any public purpose, and own-tax revenue including SGST. The 15th Finance Commission devolved 41 percent of the divisible pool, but cesses, surcharges and Centrally Sponsored Schemes (CSS) have eroded that headline number.

Constitutional architecture: Article 280 makes the Finance Commission the primary transfer mechanism; Article 275 grants-in-aid are statutory; Article 282 was meant for residual public-purpose grants. The Bhargava Commission Report 1967 had cautioned that Article 282 should not become a routine route for Union intervention in the State List.

CSS expansion: Over 60 CSS schemes now consume nearly 10 percent of Union expenditure; matching ratios were rationalised from 90:10 to 60:40 for general States under NITI Aayog (2015) and the Empowered Committee on CSS Rationalisation 2021. Cesses and surcharges — outside the divisible pool under Article 271 — have risen to about 18 percent of gross tax revenue, shrinking the effective devolved share to around 32 percent.

Federal stress: CSS templates push standardised solutions onto diverse States; conditionalities erode State priority-setting on List II subjects like agriculture, health and police; the result is the de facto unitarisation of cooperative federalism.

Way forward / Conclusion:

Cap Article 282 use within State List subjects, sunset CSS schemes, double untied grants, fold cesses into the divisible pool, and let the 16th Finance Commission anchor a CSS framework — restoring the federal bargain of the basic structure.