ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Union Budget 2021–22

Cooperative or Coercive Federalism

The purpose of this article is to throw light on certain provisions of the Union Budget 2021–22 that have diluted the spirit of cooperative federalism in the country. These setbacks for the states will eventually push them at a subordinate position vis-à-vis central government, defeating the core principle of cooperative federalism.

The Union Budget 2021–22 is another step in the direction of diluting the spirit of cooperative federalism by shifting partially certain shareable taxes and duties towards agriculture infrastructure and development cess (AIDC). This paradigm policy shift can be perceived as an encroachment by the central government on the legitimate right of the states, since it reduces the vertical transfer of resources. The statutory claim of the states towards the divisible pool is encroached by the union government by partially converting basic excise duty and special additional excise duty into AIDC, as stated in the Union Budget 2021–22. The amount of conversion is not small but is quite substantial, as the AIDC, amounts to `2.50 per litre for branded and unbranded petrol, while it is `4 per litre for branded and unbranded high-speed diesel.

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Updated On : 20th Mar, 2021
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