Supreme Court observation on freebies is judicial overreach, say experts

The Supreme Court, on July 26, had sought a reply from the Centre whether a body like the Finance Commission can regulate freebies. It also sought to know whether revenue allocation to states could be regulated by taking into account the amount a state has spent on “unnecessary freebies”, especially ahead of elections.

Legal and fiscal experts say that the SC’s observation can be considered an overreach.

That aside, there is another problem. There is no Finance Commission as of now, as the Fifteenth Finance Comm­ission’s (15th FC’s) term has ended and the Sixteenth Finance Commission is yet to be formed.

“The Supreme Court should have been told that there is no Finance Comm­ission in existence. Our term ended on October 30, 2020. It had no life after that. Till the 16th Finance Commission is formed, there can be no commission which can comment on Supreme Court’s observations,” said Ajay Narayan Jha, member of the Fifteenth Finance Commission and former finance secretary.

The SC had sought a reply from the Centre till the next hearing on August 3.

The apex court bench — headed by Chief Justice of India NV Ramana — had heard a plea seeking to issue directions to the Election Commission (EC) not to allow political parties to distribute freebies before the polls. It also sought disqualification of party symbols for those who do so.

The EC had informed the court during the hearing that it cannot regulate the promises of freebies. Meanwhile, the Centre had put the responsibility on the EC, saying that every case was different and the EC should act as a watchdog for these. “This (freebies) has to be controlled. How it is going to be done needs to be examined,” said the court.

Alok Prasanna, co-founder and team lead, Vidhi Centre for Legal Policy, said there is no legal definition of freebies currently. “It is purely a discussion of politics, welfare and finance.

Welfare schemes are for the people who are voting for a party in that state and paying taxes. So what is wrong with freebies?” he asked. He said if the Union government wants, it needs to bring a law to clearly state what can be defined as freebies and what cannot. “Economic, socio­logical and public finance experts need to be consulted to define the term and the court is neither one of those,” he said.

He said it is a part of judicial overreach. “Earlier, mid-day meals in schools were also termed freebies but now they’re considered welfare. Whatever schemes we are availing of today were also once dismissed as freebies.”

“How do you define a ‘freebie’? It is a matter of political and policy realms. One can argue that fiscally it is a bad strategy. The argument on freebies should be held in the political realm and decided there. But it is not a judicial matter,” a top government official told Business Standard.

When the 15th FC was formed, one of the terms of reference given to it was to recommend performance-based incentives to states based on “control or lack of it in incurring expenditure on populist measures.”

In its report for 2021-26, the 15th FC stated: “Many states stressed that the categorisation of schemes into populist and non-populist cannot be done objectively, as development requirements differ from state to state. Further, they argued that elected sovereign governments are accountable to the people of the state. They, rather than the Finance Commission, should have the prerogative of deciding the welfare schemes.”

The 15th FC chairman NK Singh had said earlier that the body will come up with a definition for populist schemes. In the end, the 15th FC did not define freebies or populist schemes. Jha told Business Standard that while any Finance Commission’s mandate is broad enough so that it can define even a populist scheme, any such work will have to be taken up by the

16th FC.

“It has not been defined anywhere so far, whether a scheme is populist or not. The Finance Commission makes an assessment of revenue resources and expenditure of states. It is possible to do an exercise based on a normative criteria,” he said.

Who will define freebies?

• 15th FC was tasked with recommending grants based on control of freebies
• 15th FC did not come up with definition of populist schemes
• No Finance Commission exists at the moment
• Experts say debate on freebies is for political, fiscal realms