Application of provisions relating to distribution of revenues while a Proclamation of Emergency is in operation.

Article 277, Draft Constitution of India 1948

The President may, while a Proclamation of Emergency is in operation, by order, direct that all or any of the provisions of articles 249 to 259 of this Constitution shall for such period, not extending in any case beyond the expiration of the financial year in which such proclamation ceases to operate, as may be specified in the order, have effect subject to such exceptions or modifications as he thinks fit.

Article 354, Constitution of India 1950

(1) The President may, while a Proclamation of Emergency is in operation, by order direct that all or any of the provisions of articles 268 to 279 shall for such period, not extending in any case beyond the expiration of the financial year in which such Proclamation ceases to operate, as may be specified in the order, have effect subject to such exceptions or modifications as he thinks fit.

⁠(2) Every order made under clause (1) shall, as soon as may be after it is made, be laid before each House of Parliament.

Draft Article 277 was discussed in the Assembly on 19 and 20 August 1949. It addressed the consequences of emergency on financial resources of the Union and States. The Draft Article empowered the President to make changes to the constitutional provisions on distribution of finances between the Union and states during an emergency. This order was time bound – it would expire by the end of financial year in which the emergency ended.

The Drafting Committee Chairman introduced another clause to this Draft Article – both houses of Parliament must approve the Presidential order. The Chairman felt that the power to alter financial arrangements between the Union and States cannot be left to the discretion of the President. He wanted Parliament to have a say in such important issues.

A Member opposed this amendment as he felt it didn’t change the existing power of Parliament. The Parliament had an inherent right to consider any matter of its choice. Further, he thought the powers given to the President under this provision were very wide. He believed that giving wide powers would adversely affect the financial obligations of the States. To restrict such power, he proposed to only permit the President to make changes to the transfer of income tax revenue to States.

Another Member supported curtailing the powers of the President under this Draft Article. The Draft Article would affect the budgets and planned expenditure of States causing undue financial hardship. He suggested that instead of passing a separate order, the changes to the financial provisions in the Constitution should be listed in the proclamation of emergency. This could be deliberated on by Parliament when approving the proclamation.

A Member highlighted that this power could be misused if the party in power at the Union and State levels are different. A few Members requested for the Draft Article to be reconsidered and discussed on a later date.

A Drafting Committee Member clarified that this power had been given only during an emergency. It would not completely change the fiscal structure, only a few necessary changes would be made. Nonetheless, Parliament could alter the financial arrangements even during normal circumstances.

The Drafting Committee Chairman responded to the opposition stating that the President would act reasonably and would not unduly alter the financial arrangements between the Union and States. He emphasized that the power of the President should not be curtailed and the Draft Article should be flexible to accommodate the prevailing circumstances.

The Assembly accepted the Chairman’s amendment and rejected the others.

The Draft Article was adopted with the amendment on 20 August 1949.