HYDERABAD: The Narendra Modi Government has led Andhra Pradesh up the garden path by granting a measly development package of about Rs. 350 crore for seven districts instead of the special category status promised by the Centre. It was the BJP that had extracted this promise from the UPA Government as a pre-condition for passing the AP Reorganisation Bill in Parliament in February 2014.
There is almost nothing in the Centre’s package when compared to the tall expectations of Chief Minister N. Chandrababu Naidu. Being a partner in the NDA alliance, he cannot make much ado about it either.
All that the package offers is Rs. 50 crore each for seven districts and ad hoc support of Rs. 500 crore to bridge the State’s financial gap. This is a paltry sum considering that AP’s fiscal deficit was estimated in the budget at Rs. 12,064 crore. It has been increasing ever since the budget was presented in August 2014.
A few other sops like tax incentives and additional depreciation for plant and machinery of industries have been thrown in by the Finance Ministry on Thursday. Lest the Telangana Government make a noise that the NDA Government is partial, a few concession have also been given to it.
All this gimmickry does little to camouflage the Centre’s real intention to bury the issue of giving special category status to AP. Some of the Union Ministers have been dropping hints to the effect that the National Development Council’s approval was needed but several CMs would strongly oppose giving any concession to AP without similar sops for them.
What does special category status involve
Giving special category status is primarily aimed at assisting weaker States with hilly or difficult terrain or high percentage of tribal population and enabling them to compete with those endowed with better financial or natural resources. The Centre is required to give preferential treatment in fund assistance to such States.
It is also mandated to extend excise duty concessions to help attract industries to the State. As much as 30 per cent of the Centre’s gross budget goes to the States in the special category of which there are 11 now.
The crux of the problem is that the previous UPA Government discovered that AP did not qualify for special category status much after the then Prime Minister Manmohan Singh announced in the Rajya Sabha that residuary Andhra Pradesh would indeed be given such status. Even the Cabinet gave its consent for according special category status to AP for a period of five years.
A deliberate ploy or a goof-up by UPA-II
Although not backward by any yardstick, residuary Andhra Pradesh became non-viable financially the moment it was created since revenue collections from Hyderabad, the financial hub, would go to Telangana. Possibly, this could not be a goof-up but a deliberate plan of crossing the bridge only on coming to it. In other words, managing the problem only if the AP Government raised a protest.
The Chandrababu Naidu Government will do nothing of that sort not merely because it is an NDA partner. It can ill-afford to antagonize the Centre as it needs financial assistance for building the new capital near Vijayawada, preferential treatment in allocation of funds by the 13th Finance Commission and immediate help for bridging the fiscal deficit.
Political considerations will dictate final decision
Mr. Naidu is a pragmatic leader who would rather extract these concessions than live under the illusion of getting special category status. Tamil Nadu has opposed dispensing any such favour to its Telugu-speaking neighbour as excise duty concessions would lead to flight of industries from TN to AP.
The Modi Government has apparently taken the stand that such a step would open a Pandora’s Box. Bihar, Rajasthan, Odisha and Jharkhand are among those in the queue demanding special category status.
Assembly elections are due in Bihar this year and the Janata Dal (U) has already made this a political issue. The BJP can grant special category status to AP at the peril of giving the JD (U) and the RJD a handle it beat it with.