36 | Administrative Consolidation After Political Integration

Summary and Insights from V P Menon's The Story of Integration of Indian States

1. From Fragmentation to Administrative Unity

India inherited 554 princely states, of which 216 were merged into neighbouring provinces (Part A), five became Chief Commissioners' provinces (Part C), and 310 were grouped into six Unions (Part B).  This geographical and political reorganisation reduced over 500 entities into 14 administrative units, creating a need for a comprehensive administrative overhaul.

2. Stark Contrasts in Administrative Maturity

Prior to integration, the administrative systems across the princely states varied dramatically, creating a ‘mosaic of an empire’ rather than a uniform structure. A few large and progressive states, such as Mysore, Baroda, Travancore, and Cochin, possessed well-organized administrative machinery comparable to, and in some respects even ahead of, British Indian provinces. They possessed sophisticated bureaucracies, codified laws, and functioning legislatures.

At the other end of the spectrum were numerous smaller states where administration was often primitive, personal, and lacked modern organization. Revenue and land records were often absent or poorly maintained, and judicial systems were autocratic and lacked procedural fairness. Democratic institutions were largely absent or superficial. While some states had legislatures, they often had nominated majorities, and the ruler retained a final veto. Agitation for responsible government was severely curbed by rulers keen to maintain personal rule. The integration process aimed to remove these disparities in governance and amenities within states with uniform law, organized judiciary, and experienced public services. 

3. Tasks of Administrative Integration

Menon lays out a multi-pronged agenda of integration:

• Creation of districts, taluks, and tehsils.

• Establishment of uniform administrative structures, police, and revenue systems.

• Rationalization of pay, service rules, training, and removal of incompetent staff.

• Standardization of taxation, judicial systems, audit, and financial procedures.

4. The Challenge of Uniformity

The vision was to bring these new administrative units on par with British Indian provinces, which had established civil services, organized legislatures, and sophisticated law enforcement. But administrative disparity was acute—many princely states lacked even basic survey and settlement systems. Unions had to establish central secretariats, reorganize police forces, standardize varying revenue systems, and create High Courts akin to provincial models.  The complex and varied land tenure systems, particularly the jagirdari system, required significant reform, including conferring permanent rights on cultivating tenants. The disparate judicial systems, often lacking codified laws or an independent judiciary, were reorganized to establish uniform standards, with High Courts set up on the model of provincial High Courts. The ‘jig-saw puzzle’ of interlaced territories and enclaves was tackled by exchanging these areas between units to improve administrative efficiency and law enforcement.

5. Difficulties in the Merged States

States merged with large provinces (like Madras or U.P.) were more easily integrated. Others (like Orissa or Bombay) absorbed large territories, leading to:

• Strains on provincial bureaucracies.

• Conflicts between provincial and merged-state officers over seniority and postings.

• Discontent among people of merged states due to the loss of administrative centrality.

6. Challenges in the State Unions

Administrative consolidation in the State Unions (for eg. Madhya Bharat, Patiala and East Punjab States Union (PEPSU), and Rajasthan) proved to be the most complex aspect of the integration of princely states. It arose from the inherent diversity and often rudimentary nature of the administrations within these former princely territories, requiring a comprehensive overhaul to align them with modern democratic governance.

• The princely states existed in various stages of development; while a few, like Mysore and Baroda, were relatively well-organized, most others, especially smaller ones, had rudimentary, personal, and primitive administrations. Some lacked even the basic amenities. Each state operated under its own laws, often a mix of British Indian models and arbitrary personal decrees of the rulers, which could be modified at will. This led to a multiplicity of governing agencies and differing administrative rules.

• The territories of these states were frequently interlaced and interspersed with British Indian provinces or other princely states. This severely hampered communications, trade (due to varying customs duties), and law enforcement, making coordinated development difficult.

• The administrative personnel in most of these states were often not equipped to handle the responsibilities of a modern democratic government. Integrating staff from diverse states, with varying pay scales and qualifications, led to dissatisfaction among both absorbed state servants and existing provincial service members. New ministries, often inexperienced, sometimes acted like ‘potentates’ or failed to decentralize power effectively, leading to issues like corruption and administrative disarray.

States’ transformation from autocratic setups to democratic orders required setting up entirely new or thoroughly reorganized institutions, including High Courts, Public Service Commissions, and standardized police departments across the unions. This often involved deputing experienced officers from British India to key posts, to guide the integration. The creation of a common administrative framework, including new districts, taluks, and tehsils, was also necessary. Furthermore, the existing laws had to be codified, modernized, and approximated to provincial legislation, with Central and provincial enactments being applied.

7. Personnel Management and Cadre Building

State servants often lacked training or impartial traditions. To combat parochial loyalties and improve administrative standards the establishment of Indian Administrative Service (IAS) and Indian Police Service (IPS) was crucial. This involved screening existing officers, fixing seniority, standardizing pay, and ensuring recruitment based on merit. Special Recruitment Boards were created to bring talent from across the country into new administrative structures. Experienced officers were also loaned from the Centre to fill key positions and guide the new ministries.

8. Institutional and Political Limitations

Many Unions lacked strong political leadership or rooted political organizations. Old feuds and regional loyalties interfered with integration. District boundaries and HQs were often decided based on political and caste considerations, rather than administrative logic.

9. Constitutional and Legislative Integration

Representation was ensured via Section 290-A of the Government of India Act, 1935. Legislatures were established or merged in some unions (e.g., Travancore-Cochin, Madhya Bharat). In others, ad hoc ministries were created from local Congress leaders, but these lacked institutional depth.

10. Limits and Legacy

Menon (1956) admits the administrative integration was only partially successful:

• Some critical functions like revenue administration, land settlement, and law and order remained weak. Problems were exacerbated by widespread corruption, nepotism, and political dissensions among ministers, particularly in Vindhya Pradesh where a minister was caught taking kickbacks. 

• Ministers’ haste to equate Unions with provinces ignored the legacy of underdevelopment. Due to this, there was a haste for uniformity and standardization that manifested in contradictions. For instance, ill-qualified employees in the Unions expected the same salaries as their counterparts in provinces, while demanding that performance standards be lowered to accommodate those from less developed states. 

• Yet, the framework laid by 1950 enabled future consolidation under the new Constitution. This new structure ensured that the lapse of paramountcy would not result in administrative collapse or chaos. 

Key Takeaways and Contemporary Relevance

• State formation is not merely political; it is deeply administrative. Menon shows how the success of territorial integration hinged on aligning legal, revenue, and personnel systems.

• The district emerged as a key administrative unit during this process, often requiring new boundaries and structures.

• The all-India services (IAS, IPS) became crucial to unify fragmented state cadres and build capacity.

• Modern-day federal tensions and uneven development across Indian states can be traced, in part, to this asymmetrical foundation of integration.

Menon's account reveals how decentralization and centralization co-existed—the Centre’s hand was heavy in the integration phase, but it laid the ground for decentralized administration through legislatures and Panchayati Raj later.

Prior Fragmentation and Challenges

Before 15 August 1947, the Indian princely states operated with complete fiscal independence, having their own economic systems and tax regimes. This created a patchwork of tariffs, excise duties, and internal customs, obstructing internal trade and commerce across what would become the Indian Union. The Joint Select Committee on Constitutional Reforms (1933–34) had already warned that the lack of economic coordination between British India and princely states was untenable as industrialization progressed.

The financial standing of princely states was quite diverse, resulting in greatly varied state revenues. While 19 states had annual revenues of Rs 10 million or more, many petty principalities had incomes comparable to an artisan's average wages. Most smaller states, and even some larger ones, lacked the resources to maintain a modern administration or provide essential public amenities. The cost of providing basic services, communications, and exploiting resources was beyond their individual capacity.

Initial Strategy of the Indian Government

During accession talks, the Government of India deliberately avoided raising financial commitments with princely states. This strategic omission was to ensure swift political integration by focusing only on defence, external affairs, and communications. The short timeline and states' reluctance to cede fiscal control left the issue unresolved initially.

Role of the Sarkar Committee (1947)

To address the challenge of creating a unified fiscal system, the Constituent Assembly established the Sarkar Committee. Key recommendations included:

• Suspension of uniform taxation for up to 15 years.

  
  

• Abolition of internal customs within 10 years.

  
  

• Compensation mechanisms for maritime customs.

  
  

• Application of income tax to all states, with up to 75% returned to them.

  
  

• Budget preparation under central guidance.

  
  

• Gradual transition to excise and income tax systems with grants-in-aid.

  
  

However, the Committee’s assumptions about the continued sovereignty of states were quickly outpaced by the full integration of princely states into the Indian Union.

Post-Integration Policy Shifts

Once states lost sovereignty and merged into the Union, a new model had to be adopted. The Government of India absorbed both assets and liabilities of merged states.

• States turned into Chief Commissioners’ provinces came directly under central control.

• Unions like Saurashtra and Travancore-Cochin voluntarily removed customs barriers.

Krishnamachari Committee and the Financial Integration Model (1948–49)

The Indian States’ Finances Enquiry Committee, chaired by V. T. Krishnamachari, laid out a full integration model:

• Equality in federal contribution and benefit.

• Defined integration as pooling, not acquisition.

• Recommended complete Union control over federal revenue sources.

• Suggested transitional compensation of losses for five years, tapering off over 10.

Implementation Mechanisms

The Centre assumed responsibility for:

• Railways, income tax, customs, telegraphs, audit, currency, etc., from April 1950.

• Income tax parity reached over five years.

• Revenue-gap grants or higher tax shares ensured fair compensation.

Privy Purses and Grants-in-Aid

The Centre also absorbed the burden of Privy Purses. As per the decision of Government of India, following states received additional annual grants-in-aid:

• Travancore- Cochin - Rs. 280 Lakh

• Mysore - Rs. 345 Lakh

• Hyderabad - Rs. 116 Lakh

• Saurashtra - Rs. 275 Lakh

States earning more from tax shares (e.g., Hyderabad) retained surpluses.

Role of the First Finance Commission (1951)

Headed by K. C. Neogy, the commission investigated the share of states and unions in income tax and Union excise duties. It recommended additional grants under Article 275 for Part B states, such as Travancore-Cochin (₹45 lakh annually). The Commission's enquiry revealed that, in most unions of states, the divisible share of income tax and Union excise was greater than the revenue-gap grant that had been guaranteed to them under previous agreements. It made specific recommendations to address these disparities. The work of the First Finance Commission ensured that the former princely states, now integrated into the Indian Union, had a stable and equitable financial relationship with the Centre.

Economic Planning and Developmental Assistance

• Upon their integration into the Indian Union, the former princely states, designated as Part B states (which included Unions like Saurashtra, Rajasthan, Madhya Bharat, and PEPSU, as well as individual states like Mysore, Travancore-Cochin, and Hyderabad), became eligible for financial and technical assistance from the Centre as part of India's National Five-Year Plans. This was part of a broader post-independence strategy where India adopted a model of planned economic development. 

  
  

• Beyond the general framework of Five-Year Plan aid, Saurashtra and Rajasthan received additional support due to their unique circumstances. These two, along with Madhya Bharat and PEPSU, had a special clause in their agreements promising financial and technical assistance from the Centre. This special provision was necessitated by the fact that the various component states which had been merged to form these Unions were at different stages of development, and they required targeted help from the Central Government to raise them to the administrative and developmental standards of the former British provinces. An inquiry under N. V. Gadgil Committee specifically recommended further assistance to these 4 unions in the shape of ₹8 crore. 

  
  

In the cases of PEPSU, Rajasthan, and Madhya Bharat, financial integration actually resulted in an immediate ‘gain’ for these Unions, as their federal expenditures in the 1949-50 basic year exceeded the federal revenues they surrendered to the Centre. It was agreed that these gains would contribute towards meeting the Privy Purse payments to their rulers.

Advantages of Financial Integration

The Krishnamachari Committee emphasized:

• Equal citizenship

• Central audit and technical oversight

• Access to development grants

• Unified tax policy and economic coherence

• Strengthened national integration

Conclusion

Financial integration was crucial to India’s political unity. Commissions, transitional aid, and constitutional frameworks enabled a smooth fiscal unification, laying the foundation for modern federal governance and development planning (Menon, 1956).

Sources:

1. Menon, V. P. (1956). The Story of Integration of the Indian states. Orient Blackswan.

2. Ministry of States, (1950). White Paper on Indian States. Government of India.