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Andhra Pradesh Receives Special Financial Assistance Package

September 10, 2016

Centre Announces Financial Package for Andhra Pradesh

The bifurcation of one of India’s largest states, Andhra Pradesh into two states – Andhra Pradesh and Telangana – was achieved after much political lobbying and deliberation. The split has, however, caused much angst among the people of Andhra Pradesh over the economic backlash faced by the state. Ever since, the state has been angling for a number of financial concessions from the centre. The battle against revenue deficit and an acute shortage of capital ventures has left the state deprived of its glorious economic standing. The state has been seeking preferential treatment from the Union government in terms of central funding of projects and tax breaks. Earlier this week, the central government announced a financial assistance package for Andhra Pradesh. The package includes two tax concessions and special economic assistance. This also includes the centre taking up full responsibility for funding the Polavaram irrigation project.

The special assistance measures extended by the centre include two forms of tax concessions. While the details of these concessions are yet to be outlined, these are generally meant to make up for “accelerated depreciation and investment allowance”. The state will also be getting its own railway zone under the provision. Other issues such as delimitation of constituencies in the state are being considered.

The Polavaram Irrigation Project

The Polavaram irrigation project or the construction of the Polavaram reservoir is one of the major undertakings on the River Godavari to divert unutilized waters to the Krishna basin. After decades of consideration, the foundation of the project was laid in 1980 by the then CM  T. Anjaiah. Work was stalled for numerous reasons and was resumed only in 2004 when YSR Reddy took it up. The project hit roadblocks once again following YSR’s death. In 2014, with the bifurcation of Andhra Pradesh, the project was accorded ‘national project’ status.

Finance Minister Mr. Arun Jaitley said the centre will undertake to bear all the costs of the Polavaram irrigation project since the date it was declared a national project (1 April, 2014). This includes all retrospective costs as well.. “The process of funding will be decided. One process is that NABARD will fund it and we will return the loan “ Jaitley said. It is also possible that the project may be funded in a phased manner. The state government will, however, be responsible for the construction and completion of the project on behalf of the central government. It may be expected that the long stalled project will now be fast tracked with the centre’s backing.

No Special Category For Andhra

Finance Minister Mr. Arun Jaitley categorically turned down Andhra Pradesh’s demand for a Special Category State (SCS) status due to constraints as laid down in the 14th Finance Commission. The demand for a SCS has been an ongoing one. The foundation of such a demand comes from the bifurcation of Andhra Pradesh and Telangana states. Hyderabad, the powerhouse of industry and commerce, went to Telangana while Andhra Pradesh’s new capital Amaravati is under development. Hyderabad is home to several IT companies and is a major pharmaceutical research hub. Apart from this it is a tourist hub too. The loss of Hyderabad will translate into a major setback for Andhra Pradesh. The Andhra Pradesh Reorganisation Act that deals with the provisions of the bifurcation does not mention granting an SCS status to the state. Former Prime Minister Mr. Manmohan Singh, however, had promised to grant the state such a status (in 2014) for a period of five years.

Adequate Compensation Promised

Andhra Pradesh has been attempting to gain the Special Category State (SCS) status from the Centre in the hope that this will secure for the state preferential treatment in matters of gaining monetary assistance from the centre and in getting tax breaks. The 14th Finance Commission had recommended a number of measures including devolution of 42 percent of gross tax revenue to states. As these recommendations have been accepted (in 2015), it is now not possible to grant the state such an SCS states, the FM said. He, however, did promise that the financial assistance package would equal the compensation that the state would have gained if such a status had been granted. This “Special Assistance Measure” will also be given for 5 years – the same duration that the state was promised SCS status.

Opposition Parties Unhappy

Despite the FM’s reassurances, the loss of SCS status for the state of Andhra Pradesh has left the ruling TDP red faced as it drew flak from the opposition in the state assembly. The Congress party and YSR Congress form a large section of the opposition in the state. Together they accused of the TDP and BJP (at the centre) of betraying the trust of the people of Andhra Pradesh. “The BJP and TDP have once again betrayed the people of Andhra by promising much and delivering nothing. How will Chief Minister Naidu and BJP leaders now face the public? What happened to Prime Minister Narendra Modi’s promise of fulfilling all promises made to Andhra?” the state Congress said. The two opposition parties have also staged a number of protests in cities such as Visakhapatnam, Vijayawada, and Tirupati demanding that the state be accorded SCS status. The YSR Congress has called for a statewide bandh over the issue.

 


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