DOI Page / Citation link:
https://doi.org/10.11588/diglit.68026#0129
ROYAL COMMISSION UPON DECENTRALIZATION.
123
(c) That this income shall be given in the form of
a defined share of the revenue which the
Local Government collects, in order that
the Local Government’s resources may
expand along with the needs of its
administration.
(rf) That, so far as possible, the same share of the
chief sources of revenue shall be given to
each province, to insure a reasonable equality
of treatment.
Rin pursuance of these principles, the Government of
India have undertaken the whole cost of the adminis-
tration of the following services :—(1) Military
and defence. (2) Railways.! (3) Opium. (4) Salt.
(5) Customs. (6) Post and Telegraphs. (7) Mint.
(8) Political.! (9) Territorial and Political Pensions.
(10) Protective Railways and Irrigation. (11) Eccle-
siastical. The Government of India also undertake
the whole of the Home charges, including the gain or
loss in exchange upon Government remittances between
England and India ; and they accept complete responsi-
bility for the public debt, although a certain share of
the interest on irrigation capital is recovered from
Local Governments. Furthermore, they bear the
direct cost of famine relief up to a certain stage, under
arrangements which will be subsequently described.
Finally they make themselves responsible for the cost
of all remissions of taxation. To meet these charges
the Government of India reserve to themselves virtually
the entire revenues from the first eight of the above
services, the political revenue consisting only of tributes
from certain Native States.
All the other branches of the general administration
are, broadly speaking, under the provincial Govern-
ments ; and all the other sources of revenue are placed
at their disposal, in such measure as is necessary to
meet the resulting expenditure. The Local Govern-
ments receive one-half of the proceeds from the
following main heads of revenue, which are known as
“ divided heads ” :—(1) Land Revenue.J (2) Stamps.
(3) Excise. (4) Income-Tax. (5) Forest. (6) Forest
irrigation Works. (Madras and Bombay only.)§
They also receive the whole of the remaining public
revenues collected within their jurisdiction, except
those described above.
In the interests of accuracy it may be pointed out
that, in the case of all but one of the divided heads,
the Government of India pay the same ratio of the
cost of collection as they obtain of the revenues. The
exception is Land Revenue, the administration of
which is wholly a provincial charge, for the reason
that it represents the cost of district administration.
The Imperial Government also undertake the charges
of direct famine relief under an arrangement by which
each Local Government receives an annual credit on
the imperial revenues as an insurance against famine.
The credits, which are graduated according to the
liability of each province to suffer from scarcity,
accumulate, subject to a fixed maximum, until famine
actually occurs. The cost of the relief measures in
each province is then borne by the Government of
India up to the amount of the accumulated credit of
the province. After this amount has been spent, the
further charges are shared half and half by the Imperial
and the Local Governments.
Such are the principles and practice of the ordinary
provincial settlements. The object of making these
settlements jMasi-permanent was to give the Local
Governments a more independent position, and a more
substantial and enduring interest in the management
of their resources than had previously been possible.
Under the previous system, when settlements were
revised every five years, it was the practice for the
Imperial Government to resume the surplus of the
Local Government’s revenue over its expenditure.
This unfortunate necessity (which it is only just to
say was largely the result of severe financial pressure
on the Government of India during the years of low
exchange) went far to destroy any incentive in a Local
! I need not refer to certain small items of expenditure
which are classed under these heads as provincial or local,
e.t/., District Boards’ railways.
| The United Provinces and the Punjab, however, receive
only i'ths of the revenue under this head.
§ The Punjab gets |ths of the revenue under this head.
Otherwise the head is wholly imperial in the Central
Provinces and Burma, and wholly provincial in Bengal
and the United Provinces.
33383
Government to economize, as it knew that its reduced J. S,
standard of expenditure would be the basis for a Meston.
correspondingly unfavourable settlement at the next ——■
revision. All this disappears under the existing 6 Apr., 1908,
system. A Local Government need not fear, in -
anything except very abnormal circumstances, the
resumption of its surplus revenue by the Imperial
Government; it can count upon a reasonable con-
tinuity of financial policy ; it will be able to enjoy
fully the fruits of its economies, and it will not be
hurried into ill-considered proposals in order to raise
its apparent standard of expenditure. On the other
hand, the Imperial Government improves its relations
with the Local Government by avoiding five-yearly
controversies over the settlement ; it can calculate its
own resources with more confidence and can undertake
reductions of taxation or fresh schemes of expenditure
with a clearer knowledge of the consequences than was
formerly possible.
44861°. Is there any objection to the present settle-
ments being adopted by the Secretary of State under
the Statute of 1858 as his allocation of the revenues of
India ?—I read this question as alluding to the grants
or appropriations of Indian revenues which the Secre-
tary of State, with the concurrence of the majority of
his Council, may make under section 41 of the Statute.
The point for consideration, as I understand it, is whether
the Secretary of State might conveniently give a
definite grant to Local Governments of the shares of
revenue which have been placed at their disposal under
the settlement arrangements now in force, on condition
of their maintaining the services entrusted to them
under those arrangements. In limine, it may be ex-
plained that no grant of the revenues to a Local
Government can ever be absolutely permanent and
final. The expression “ guusi-permanent ” has been
deliberately employed in describing the existing settle-
ments. The Local Governments have been warned
that a power of revision is reserved “when the varia-
tions from the initial relative standards of revenue and
expenditure have, over a substantial term of years,
been so great as to result in unfairness either to the
province itself or to the Government of India, or in
the event of the Government of India being con-
fronted with the alternatives of either imposing
general taxation or seeking assistance from the pro-
vinces.”! H our opium trade with China were sud-
denly cut off, or if our customs tariff were abolished,
or if we were called upon to provide a navy of our
own, we should have to consider whether Local
Governments can be allowed to retain their shares of
the revenues now allotted to them. But, as indicated
in the above quotation, a revision of the arrangements
might become necessary for less sensational reasons
than these. Remissions of taxation or expensive
reforms (such as those of the police force) are abnor-
mal forms of expenditure which have to be financed as
a rule by the Government of India, through the
medium of recurring grants to the Local Govern-
ments concerned. The aggregate of such grants may
reach in time' a considerable figure, and the Local
Government is thus in the unfavourable position of
having a large fixed grant as part of its resources
for meeting its growing expenditure. A re-adjust-
ment would ultimately be necessary, such as has
recently taken place in the Madras settlement. Minor
adjustments are also of frequent occurrence^ ; and
although these do not affect the basis of the settle-
ments, they show that finality would be extremely
difficult of attainment, if not impossible.
It would not therefore, in my view, be either practi-
cable or expedient to adopt the present settlement as
the foundation for a permanent grant from the
revenues of India to Local Governments. If, on the
other hand, the allocation were to be merely temporary
or provisional, I cannot see what advantage would be
fThe quotation is taken from the usual paragraph in
the Government of India’s letter communicating final
orders on the conclusion of a ^wusi-permanent settle-
ment.
IA recent example occurred in connection with Govern-
ment printing. The Central Press of the Government of
India used formerly to provide provincial presses with
type free of charge. It was decided, in the interests of
accurate book-keeping, to charge the provincial presses the
cost of type thus supplied : but as this was a service
which had not been taken account of in the provincial
settlements, the Government of India gave counter-
balancing assignments to the Local Governments affected.
Q 2
123
(c) That this income shall be given in the form of
a defined share of the revenue which the
Local Government collects, in order that
the Local Government’s resources may
expand along with the needs of its
administration.
(rf) That, so far as possible, the same share of the
chief sources of revenue shall be given to
each province, to insure a reasonable equality
of treatment.
Rin pursuance of these principles, the Government of
India have undertaken the whole cost of the adminis-
tration of the following services :—(1) Military
and defence. (2) Railways.! (3) Opium. (4) Salt.
(5) Customs. (6) Post and Telegraphs. (7) Mint.
(8) Political.! (9) Territorial and Political Pensions.
(10) Protective Railways and Irrigation. (11) Eccle-
siastical. The Government of India also undertake
the whole of the Home charges, including the gain or
loss in exchange upon Government remittances between
England and India ; and they accept complete responsi-
bility for the public debt, although a certain share of
the interest on irrigation capital is recovered from
Local Governments. Furthermore, they bear the
direct cost of famine relief up to a certain stage, under
arrangements which will be subsequently described.
Finally they make themselves responsible for the cost
of all remissions of taxation. To meet these charges
the Government of India reserve to themselves virtually
the entire revenues from the first eight of the above
services, the political revenue consisting only of tributes
from certain Native States.
All the other branches of the general administration
are, broadly speaking, under the provincial Govern-
ments ; and all the other sources of revenue are placed
at their disposal, in such measure as is necessary to
meet the resulting expenditure. The Local Govern-
ments receive one-half of the proceeds from the
following main heads of revenue, which are known as
“ divided heads ” :—(1) Land Revenue.J (2) Stamps.
(3) Excise. (4) Income-Tax. (5) Forest. (6) Forest
irrigation Works. (Madras and Bombay only.)§
They also receive the whole of the remaining public
revenues collected within their jurisdiction, except
those described above.
In the interests of accuracy it may be pointed out
that, in the case of all but one of the divided heads,
the Government of India pay the same ratio of the
cost of collection as they obtain of the revenues. The
exception is Land Revenue, the administration of
which is wholly a provincial charge, for the reason
that it represents the cost of district administration.
The Imperial Government also undertake the charges
of direct famine relief under an arrangement by which
each Local Government receives an annual credit on
the imperial revenues as an insurance against famine.
The credits, which are graduated according to the
liability of each province to suffer from scarcity,
accumulate, subject to a fixed maximum, until famine
actually occurs. The cost of the relief measures in
each province is then borne by the Government of
India up to the amount of the accumulated credit of
the province. After this amount has been spent, the
further charges are shared half and half by the Imperial
and the Local Governments.
Such are the principles and practice of the ordinary
provincial settlements. The object of making these
settlements jMasi-permanent was to give the Local
Governments a more independent position, and a more
substantial and enduring interest in the management
of their resources than had previously been possible.
Under the previous system, when settlements were
revised every five years, it was the practice for the
Imperial Government to resume the surplus of the
Local Government’s revenue over its expenditure.
This unfortunate necessity (which it is only just to
say was largely the result of severe financial pressure
on the Government of India during the years of low
exchange) went far to destroy any incentive in a Local
! I need not refer to certain small items of expenditure
which are classed under these heads as provincial or local,
e.t/., District Boards’ railways.
| The United Provinces and the Punjab, however, receive
only i'ths of the revenue under this head.
§ The Punjab gets |ths of the revenue under this head.
Otherwise the head is wholly imperial in the Central
Provinces and Burma, and wholly provincial in Bengal
and the United Provinces.
33383
Government to economize, as it knew that its reduced J. S,
standard of expenditure would be the basis for a Meston.
correspondingly unfavourable settlement at the next ——■
revision. All this disappears under the existing 6 Apr., 1908,
system. A Local Government need not fear, in -
anything except very abnormal circumstances, the
resumption of its surplus revenue by the Imperial
Government; it can count upon a reasonable con-
tinuity of financial policy ; it will be able to enjoy
fully the fruits of its economies, and it will not be
hurried into ill-considered proposals in order to raise
its apparent standard of expenditure. On the other
hand, the Imperial Government improves its relations
with the Local Government by avoiding five-yearly
controversies over the settlement ; it can calculate its
own resources with more confidence and can undertake
reductions of taxation or fresh schemes of expenditure
with a clearer knowledge of the consequences than was
formerly possible.
44861°. Is there any objection to the present settle-
ments being adopted by the Secretary of State under
the Statute of 1858 as his allocation of the revenues of
India ?—I read this question as alluding to the grants
or appropriations of Indian revenues which the Secre-
tary of State, with the concurrence of the majority of
his Council, may make under section 41 of the Statute.
The point for consideration, as I understand it, is whether
the Secretary of State might conveniently give a
definite grant to Local Governments of the shares of
revenue which have been placed at their disposal under
the settlement arrangements now in force, on condition
of their maintaining the services entrusted to them
under those arrangements. In limine, it may be ex-
plained that no grant of the revenues to a Local
Government can ever be absolutely permanent and
final. The expression “ guusi-permanent ” has been
deliberately employed in describing the existing settle-
ments. The Local Governments have been warned
that a power of revision is reserved “when the varia-
tions from the initial relative standards of revenue and
expenditure have, over a substantial term of years,
been so great as to result in unfairness either to the
province itself or to the Government of India, or in
the event of the Government of India being con-
fronted with the alternatives of either imposing
general taxation or seeking assistance from the pro-
vinces.”! H our opium trade with China were sud-
denly cut off, or if our customs tariff were abolished,
or if we were called upon to provide a navy of our
own, we should have to consider whether Local
Governments can be allowed to retain their shares of
the revenues now allotted to them. But, as indicated
in the above quotation, a revision of the arrangements
might become necessary for less sensational reasons
than these. Remissions of taxation or expensive
reforms (such as those of the police force) are abnor-
mal forms of expenditure which have to be financed as
a rule by the Government of India, through the
medium of recurring grants to the Local Govern-
ments concerned. The aggregate of such grants may
reach in time' a considerable figure, and the Local
Government is thus in the unfavourable position of
having a large fixed grant as part of its resources
for meeting its growing expenditure. A re-adjust-
ment would ultimately be necessary, such as has
recently taken place in the Madras settlement. Minor
adjustments are also of frequent occurrence^ ; and
although these do not affect the basis of the settle-
ments, they show that finality would be extremely
difficult of attainment, if not impossible.
It would not therefore, in my view, be either practi-
cable or expedient to adopt the present settlement as
the foundation for a permanent grant from the
revenues of India to Local Governments. If, on the
other hand, the allocation were to be merely temporary
or provisional, I cannot see what advantage would be
fThe quotation is taken from the usual paragraph in
the Government of India’s letter communicating final
orders on the conclusion of a ^wusi-permanent settle-
ment.
IA recent example occurred in connection with Govern-
ment printing. The Central Press of the Government of
India used formerly to provide provincial presses with
type free of charge. It was decided, in the interests of
accurate book-keeping, to charge the provincial presses the
cost of type thus supplied : but as this was a service
which had not been taken account of in the provincial
settlements, the Government of India gave counter-
balancing assignments to the Local Governments affected.
Q 2