Provincial Loan Account.

48 Each Province had such an account with the 'Central Government, and the money borrowed in this way was advanced to agriculturists and for similar other purposes. But the Reform Scheme requires that such joint accounts should be discontinued. The Financial Relations Committee recommended that as many of the provinces as were ready viz. Bengal, the Punjab, Central Provinces, and Assam, should be allowed to take over these accounts from 1st April 1921, and others viz., Bombay, United Provinces, Burma, and Bihar Orissa should be called upon to wind up the account within 12 years, they paying interest upon amounts which yet remained unpaid by them.

Devolution Rule 23-About Provincial Loan Account lays down-Any moneys which, on the first day of April 1921, are owed to the Governor-General in Council on account of advances 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 when for special reasons the Governor-General in Council may otherwise direct, be repaid before the expiry of 12 years. It shall be open for any local Government to repay in any year an amount in excess of the fixed instalment.

The estimated outstandings of the Provincial Loan Account in the name of each province on 31st, March 1921 were as follows:

Other cial Rules.

Finan

49. Devolution Rule 24-Capital expenditure on irrigation Works The Capital sums spent by the Governor-General in Council upon the construction in various provinces of productiveand 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.

Rule 25-Advances by the Government of India-The Governor-General in Council may at any time make to a local Government an advance from the revenues or moneys accruing to the Governor-General in Council on such terms as to interest and repayment as he may think fit.

Rule 26-Priority of Interest-The payment of interest on loans and advances made under the three preceding rules (i. e. on Provincial Loan Account, Capital expenditure on irrigation works, and advances) and the repayment of the principal of an advance under Rule 23, shall be a charge on the annual allocated revenues of the local Government, and shall

have priority over all other charges, save only contributions payable to the Governor-General in Council.

Famine Assignments.

50. Before 1912, the liability for famine expenditure ay upon the Provinces, and the Central Government stepped in only when Provincial resources were exhausted. In that year a new Famine Insurance Scheme was devised by which the Government of India placed to the credit of each province a fixed amount on which it could draw in case of famine without trenching upon its normal resources.. When this fund was exhausted further expenditure was shared equally between the Central and Provincial Governments, and in the last resort the Government of India gave money out of their own revenue. In 1917 Famine Relief expenditure was made a divided head, the outlay being borne by the Central and Provincial Governments in the proportion to 3 to 1. With the abolition of divided heads under the Reforms, Famine Relief required a new arrangement; famine expenditure has been accordingly wholly provincialized. The idea is that there should be built up in each province a Famine Insurance Fund which could be drawn upon when required, without having to seek the aid of the Government of India, and Devolution Rule 29 therefore provides that each province should set aside a fixed sum every year, calculated on its average liability to famine, and instead of dissipating it, to hold it in reserve against lean years. The sums fixed for each are as follows.

Any portion of the grant which is not so spent is to be transferred to the Famine Insurance Fund of the Province. If this fund exceeded six times the annual assignment, the latter might be temporarily suspended. This fund could be further utilized in the grant of loans to cultivators or for relief purposes. This fund is to form part of the general balances of the Central Government who is to pay interest on it.

Summary.

51. So much about the new Financial arrangement between the Government of India and the Provincial Governments. A complete bifurcation between Central and Provincial heads of revenue, a fixed and progressively decreasing contribution to the Central Treasury as the only surviving financial nexus between the two, a simpler control over provincial expenditure, increased powers of taxation and borrowing, the closure of the provincial loan accounts, freedom in drawing upon provincial balance, revised conditions for advances to the province, and a new system of famine assignments are the chief features of this new arrangement.

52. Legislative Devolution

Pre-Reforms

Condition.

We have hitherto considered how the control of the Central Government over provincial finance has been got rid of under the new regime. We have now to consider how the same thing has been done in the matter of legislation. We shall first see how the matter stood before the Reforms. The restrictions upon a Provincial Council were two-fold-statutory, and by executive order. Thus it could in no case repeal or amend an Act of Parliament; it could not repeal an Act of the Governor-General's Legislative Council without the previous sanction of the Governor-General; it could not pass a law

affecting the public debt of India, a Customs or other tax imposed by the Central Government, the currency, or posts and telegraphs, or the Penal Code or the Army and Navy. And it could not, without the previous sanction of the Governor-General, consider any law affecting the religion or religious rites and usages of any class of British subjects in India, or regulating patents or copy rights, or affecting the relations of the Government with the foreign Princes or States.

And by executive order every provincial project for legislation was required to be submitted for previous sanction to the Governor-General before introduction into the Council, and so also all material amendments to it after introduction. Of course every provincial Act had to receive the assent of the Governor-General. And: again, as the Indian Legislative Council had concurrent powers of legislation for the whole of India and any province of it, important laws though of provincial application were passed by it for the sake of uniformity and codification.

Here it will be noted that the Indian Constitution was never strictly federal. And because the Indian Legislative Council was the parent Council, and as many provinces were without any council at all upto recent years, a large part of the legislative field was occupied by the Acts of the older Council.

All these things had: come to restrict greatly the provincial field for legislation. Some effective control was undoubtedly necessary in view of each province having, in theory, the right to range over the whole legislative field. But it has proved particularly harmful in holding up legislation affecting local and social customs which so powerfully mould Indian life and opinion. No doubt they are being gradually modified by the rulings of the High Courts-but this process is fitful and slow. Provincial