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198. The Government of India have accepted the recommendations of the Indian States Finances Enquiry Committee as modified in subsequent discussions with the States concerned, and steps have been taken to give effect to federal financial integration accordingly. The Memoranda of Agreements already executed and ratified by the States will now be embodied in formal Agreements. These Agreements will be under:—

199. The Government of India have already in hand the necessary action to deal with innumerable points of detail—legislative, administrative, budgeting, accounting, etc.—pertaining to particular matters concerning each federal department in the States. These are under active examination, and considerable progress has already been made, in consultation with the States and the Ministries of the Government of India concerned.

200. While federal financial integration can, on the whole, be regarded as ultimately having satisfactory results from the purely financial point of view, there is obvious need to proceed with caution, especially in the first three or four years. From the point of view of the States themselves, it is difficult to make any reasonably precise estimates of the results of federal financial integration upon their revenues. Even so, those States which will directly profit from federal financial integration, viz., PEPSU, Madhya Bharat and perhaps Rajasthan, need hare no cause for anxiety, though in the case of the last two, there will be the problem of replacing internal customs duties by sales tax. As regards those States which will incur a loss in consequence of federal financial integration viz., Hyderabad, Mysore, Trevancore-Cochin and Saurashtra, none except perhaps Travancore-Cochin, need have cause for concern in the first five years, since their losses will be fully re-imbursed to them by guaranteed subventions from the Centre already referred to in an earlier paragraph and since internal customs duties (in Hyderabad and Saurashtra) will be abolished only gradually. In the excepted case, the immediate abolition of internal customs duties, necessitated by the formation of the Union of Travancore and Cochin, will