Inter-State relations: councils, water disputes, trade & commerce

The constitutional scheme of inter-State coordination

The Constitution treats India as a Union of States in which horizontal friction between States is a structural certainty, and Part XI (Articles 245-263) together with Part XIII (Articles 301-307) supplies the machinery to manage it. Four instruments matter for Prelims and GS-2.

Article 261 – Full faith and credit. Public acts, records and judicial proceedings of the Union and of every State are entitled to full faith and credit throughout India (Art. 261(1)). Final judgments of civil courts in any part of the territory are capable of execution anywhere in India (Art. 261(3)). This guarantees the portability of legal acts across State boundaries.

Article 262 – Adjudication of water disputes. Parliament may by law provide for the adjudication of disputes relating to the waters of inter-State rivers and river valleys, and may bar the jurisdiction of the Supreme Court or any other court (Art. 262(2)). Parliament enacted the Inter-State River Water Disputes Act, 1956 and the River Boards Act, 1956 under this head.

Article 263 – Inter-State Council. The President may, if it appears that the public interest would be served, establish a Council to inquire into and advise upon disputes between States, and to investigate and discuss subjects of common interest. It is an advisory, recommendatory body.

Part XIII – Trade, commerce and intercourse. Article 301 declares trade, commerce and intercourse throughout the territory of India to be free, subject to the restrictions in Articles 302-305.

The Inter-State Council

Despite Article 263 being part of the original 1950 text, no permanent Council existed for decades. The Sarkaria Commission (1988) recommended its creation as a permanent forum. The Inter-State Council was constituted on 28 May 1990 by a Presidential Order. It is chaired by the Prime Minister, with all Chief Ministers, Chief Ministers/Administrators of Union Territories with legislatures, and six Union Cabinet Ministers nominated by the PM as members.

The Council is a deliberative and recommendatory body, not a decision-making one; its mandate is to discuss matters of common Centre-State and inter-State interest. A Standing Committee of the Inter-State Council (constituted 1996) handles continuous consultation. Note the distinction the examiner loves: the Inter-State Council under Article 263 is constitutional in source though created by executive order, whereas the Zonal Councils are statutory bodies created by the States Reorganisation Act, 1956 (five zonal councils; the North-Eastern Council under a separate 1971 Act). Mixing these up is a classic Prelims trap.

The NITI Aayog, created by Cabinet resolution on 1 January 2015 replacing the Planning Commission, is an executive think-tank and is not a substitute for the Article 263 mechanism, though it advances cooperative and competitive federalism.

Inter-State river water disputes

Water is the most litigated zone of inter-State relations. Under Article 262 and the Inter-State River Water Disputes Act, 1956 (ISRWD Act), when negotiation fails the Central Government constitutes an ad hoc Tribunal. The 2002 amendment mandated that a Tribunal be constituted within one year of a request and deliver its award within three years (extendable by two). Crucially, Section 11 of the ISRWD Act and Article 262(2) bar the Supreme Court's and all other courts' jurisdiction over a notified water dispute—yet the Court retains jurisdiction over the Tribunal's award under Article 136 (Special Leave Petition), as held in practice.

Key instances to retain: the Krishna Water Disputes Tribunal, the Godavari Tribunal, the Narmada Water Disputes Tribunal (award 1979), and the Cauvery Water Disputes Tribunal (constituted 1990, final award 2007). In State of Karnataka v. State of Tamil Nadu (2018), the Supreme Court modified the Cauvery allocation, declared river water a national asset held by no State in absolute terms, and directed creation of the Cauvery Water Management Authority. The Inter-State River Water Disputes (Amendment) Bill, 2019 proposed a single permanent Tribunal with multiple benches and a Disputes Resolution Committee—high-yield for prelims even as pending legislation.

Freedom of trade, commerce and intercourse (Part XIII)

Article 301 guarantees freedom of trade, commerce and intercourse throughout India. This freedom is not absolute:

• Article 302 lets Parliament impose restrictions in the public interest.
• Article 303 bars discriminatory or preferential laws unless Parliament declares a scarcity of goods.
• Article 304(a) permits a State to tax imported goods provided like local goods are taxed equally (no discrimination); Article 304(b) permits reasonable restrictions in the public interest, but a Bill under 304(b) needs the President's prior sanction.

The landmark Atiabari Tea Co. v. State of Assam (1961) held that taxes directly and immediately restricting movement fall within Article 301. Automobile Transport (Rajasthan) v. State of Rajasthan (1962) evolved the compensatory tax doctrine—regulatory or compensatory taxes facilitating trade do not violate Article 301. The nine-judge bench in Jindal Stainless Ltd. v. State of Haryana (2016) overruled the compensatory tax doctrine, holding that non-discriminatory taxes do not per se offend Article 301; only discriminatory or directly restrictive levies do.

The 101st Constitutional Amendment (2016) introducing GST created the GST Council under Article 279A, a federal fiscal body chaired by the Union Finance Minister—a further instrument of inter-State economic coordination that subsumed entry tax and most barriers to inter-State commerce.

Why this matters for the exam

Inter-State relations is a dual-paper topic. In Prelims (GS Paper I), the UPSC repeatedly tests the precise constitutional pedigree of bodies: whether a body is constitutional, statutory or executive. The Inter-State Council (constitutional source, Article 263, created by executive order 1990), Zonal Councils (statutory, SRA 1956), NITI Aayog (executive, 2015 resolution) and the GST Council (constitutional, Article 279A) form a frequently-confused cluster. Memorise the source and chair of each.

A second high-frequency Prelims theme is Article 262 and the bar on judicial jurisdiction: candidates must know that ordinary courts are barred for notified water disputes, but Article 136 SLP survives. PYQs have asked whether the Supreme Court has original jurisdiction in inter-State water disputes (it does not, by virtue of Article 262 read with Section 11 of the 1956 Act, which is the exception to Article 131's original jurisdiction).

For Mains GS-2, the syllabus item 'functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure' maps directly here. Expect analytical questions on why tribunals are slow (multiplicity, no fixed time-frames before 2002, delayed notification of awards, repeated SLPs), and whether the proposed single permanent tribunal (2019 Bill) is a cure. The Cauvery, Krishna, Mahanadi and Ravi-Beas disputes are ready answer-fodder.

High-yield facts to retain

• Article 263 – Inter-State Council; advisory; chaired by PM; constituted 28 May 1990 on Sarkaria recommendation.
• Article 262 – water disputes; ISRWD Act 1956 and River Boards Act 1956; courts barred (Section 11).
• 2002 amendment – Tribunal within 1 year; award within 3 (+2) years.
• Cauvery – Tribunal 1990, award 2007, SC 2018 'national asset', Cauvery Water Management Authority.
• Article 301 – free trade; restrictions under 302-305; 304(b) needs President's prior sanction.
• Jindal Stainless (2016) overruled compensatory-tax doctrine; test is discrimination, not compensation.
• Article 279A – GST Council (101st Amendment, 2016).

A disciplined candidate links these to current Centre-State frictions on river-sharing and GST compensation, the hallmark of a top-decile Mains answer.