Telling Tall Tales is a fortnightly column by Tara Krishnaswamy on matters that matter.

When we hear the word federalism, what immediately springs to mind is often states' rights or ethnic rights, based on language or culture. The fight against the imposition of Hindi, or the demand for separate states by ethnic groups, are typical examples. Some of these demands have yielded political results, like the linguistic reorganisation of states. They may have also been carved into law or policy, like the recent mandate by Bruhat Bengaluru Mahanagara Palike (BBMP) that 60% of signage space must be for Kannada. Socially too, such initiatives have foregrounded ethnic consciousness in citizens.

These are what former Chief Justice of India DY Chandrachud, in his article in The Indian Express, terms “identity-based federalism”. He also mentions the other type of federalism, one that is “efficiency-based”. For example, the powers of state governments in administration or policing, which are federal instruments embedded in the Constitution itself. Or, judicially provided, such as through the Supreme Court ruling pronounced by a bench headed by the CJI a few weeks back, which upheld the right of states, not the Union, to tax alcohol.

Efficiency-based federalism is less clamorous, but has far-reaching consequences that are not of common knowledge. For example, the Mahatma Gandhi National Rural Employment Guarantee Act is (MGNREGA) drafted for implementation of works and disbursal of wages at a block level (cluster of villages that forms an administrative unit) not top down from the Union. This makes it inherently decentralised or federal in nature, and more efficient in the selection of local works.

Recently, I came across one such well-concealed nugget of efficiency-based federalism. Not one that is enshrined in the Constitution or judicially provided, but one that came through mundane governance.

The year was 1971, the state Tamil Nadu, and its chief minister Karunanidhi, who was serving his second term. Bus transport in the state was to a large extent, privatised. 

In accordance with the recommendations of the Somasundaram Committee that he had set up, the CM proceeded to nationalise bus transport in phases. The Tamil Nadu Fleet Operators Stage Carriages (Acquisition) Act was passed in 1971 and the subsuming of private operations, their fleet, and staff by the state of Tamil Nadu, began.

The first state road transport undertaking Karunanidhi established by this law was the Pallavan Transport Corporation of Madras on January 1, 1972. It should have been a simple matter of establishing the undertaking as a wholly owned subsidiary corporation of the government of Tamil Nadu, registered under the Road Transport Corporation Act of 1950, a Union law. This is how other states had done it so far, and do so even today.

But Karunanidhi took an unusual route. Instead of using the RTC Act, one that enabled the Union to also appoint two directors to the corporation, with their opinions and powers, he decided to go with the Companies Act for registering all transport corporations. 

Primarily designed for private companies, the Companies Act provides a regulatory framework with maximum flexibility to investors. In this case, the state of Tamil Nadu would have full control over the company's directors with zero Union interference, and no constraints on staff selection, wages, or transport operations.

Such a state transport undertaking would be fully autonomous, with absolute state control, hence a most federal set up. Indeed, there are only 10 road transport corporations in India set up under the Companies Act, eight of which are in Tamil Nadu.

IAS officers who have managed both state-owned companies registered under the Companies Act, and Road Transport Corporations registered under the RTC Act, say that in reality, they experience no Union intervention in the functioning of the latter. Indeed, there are mandatory Union appointees but they may not even show up to meetings.

It is fascinating that Karunanidhi had so internalised states' rights that he and his government thought through every detail to maximise autonomy, even in the transport department. It is much more than that, though. 

The design of public institutions impacts the efficiency of decision-making and operations, as citizens well know. If our street-light does not work, it is a matter of going to the local Corporator or Corporation, a few kilometres at most. On the other hand, if our metro rail construction is delayed, as it inevitably is, Delhi is our improbable destination.

For a state subject, it is efficient to fashion the institution – in this case, the state road transport undertaking – to be entirely state-controlled. Karunanidhi's choice of the Companies Act as the regulatory framework speaks to the most efficient form and shape of the institution as the vehicle for transport policy. While Union-appointed directors may co-operate with the state’s decisions, at least in absentia, all it would take is a couple of over-enthusiastic Union representatives to derail meetings and decisions.

I like to call this the quieter federalism, well-fitted, far-sighted, and no din. 

Tara Krishnaswamy is a political creature with an urge to write. She works on political and policy communication.