Page:White Paper on Indian States (1950).pdf/101

 of the. Federation. Looked at from the point of view of the States, however it involved some very difficult administrative and financial problems. In the first place, there was the sheer administrative problem of bringing about such a large scale merger of functions, resources and personnel at the federal level; next there was the problem of equitable allocation and apportionment of liabilities; and finally, there was the need to evolve certain transitional financial adjustments such as would avoid any sudden financial dislocation in the States. The Committee fully realised the magnitude of these difficulties and the necessity to find adequate solutions for them.

(1) The Committee's recommendations concerning the administrative problem need not be referred to here. Its various aspects—legislative, executive and "personnel"—are under separate examination, in consultation with the States and with the various Ministries of the Government of India.

(2) In regard to the equitable allocation and apportionment of the liabilities of the States between them and the Centre, the Committee's detailed recommendations are contained in Chapter III of Part II of its Report; and their actual working has been illustrated in the subsequent chapters which contain the integration schemes for individual States. As an example, Section B of the Mysore Scheme (in Chapter IV at p. 31 of Part II of the Committee's Report) may be referred to. These recommendations resulted from certain basic principles, set out at p. 21 of Part I of the Committee's Report, viz:—

"(i) that the Centre should also take over all public debts specifically incurred in connection with (federal) assets;

(ii) that where the public debt of a State is not specifically earmarked as incurred for individual capital assets, it should be distributed between the Centre and the State in proportion to the "federal" and "provincial" productive capital assets;

(iii) that where, apart from public debt, these is in any State, an excess of current liabilities over liquid assets, such excess should also be distributed between the Centre and the State in the same proportion as above; and