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September 9, 2016 / subramanyam

Let’s not fall into the same trap again


While I am a diehard  supporter of BJP, I have my own reservations with the package that was declared by the center yesterday. However, I also feel that there are quite some good points in the announcement made.  In this post I am speaking about the stuff I liked and the stuff I disliked in the package.  This might not go down very well with people who are seeing this issue from an emotive perspective.  I  request you to see facts as facts and not go with the emotive drama around the issue.

While bifurcating the combined Andhra Pradesh State in 2014. The Center made a few assurances.  The biggest ones in the minds of the people are

1. Special category status to Andhra Pradesh.
2. Polavaram as a National Project.
3. 10 national level Educational Institutions.
4. Financial assistance to the construction of Secretariat, Government Offices, Raj Bhavan, High Court and other Government Buildings.
5. Tax Exemptions for Industries.
6. Financial assistance to the backward districts of A.P.
7. Center would fund the revenue deficit for Andhra Pradesh.
8. Feasibility Study for the establishment of a steel plant in Cuddappah district.
9. Feasibility study for a Railway Zone in Visakhapatnam.
10.Feasibility Study for a port near Dugarajapatnam

In one of the recent Rajya Sabha debates Mr. Jairam Ramesh , the architect of the flawsome AP reorganization act was saying that, when the Center meant Feasibility study, it meant that the government would take a positive decision on establishing that particular institution in Andhra Pradesh.

Now, let us see as to what each of these promises means.

Issue 1 : Special Category Status

In A.P, currently 99% of the population seem to believe this as the silver bullet that clears all the ills of the state.  However, this is what it means.
1. For all Central Assisted State Plan  (CASP) schemes, Central Government’s contribution will be 90% for the Special Category States, for the non-special category states, the center will give 60% of the funds.
2. For the Externally Aided Projects (EAP : Projects funded by loans from  World Bank, BRICS bank, Asian Development Bank etc.)  the center will pay 90% of the cost for Special Category States and 60% of the cost for non-special category states.

In the case of AP, we got an assurance only on CASP from the previous governmen (UPA)t and not for EAPs.

Now, the NDA government in its statement yesterday has agreed to fund the CASP as well as EAP projects on par with Special Status States.

Now I really don’t understand why we should have a problem with this.  a. The calculation on this has come to around 3K crores per annum and the state government is poised to receive that.   So we would receive 15000 crores in this regard.

b. Then, since this would ease up borrowings from the noose of Fiscal Responsibility and Budget Managment (FRBM) Act we might get borrowing for extra 3K crores per annum.  I am not very sure about this. Please correct me if I am wrong.

From A & B we must get a benefit of  a minimum of 15000 crores and a maximum of 30,000 crores in the next 5 years.

Now where did we lose on the special status here? Please explain.

Issue 2 :  Polavaram Project
For National Projects the center funds either 70% or 90% of the project cost.  In the case of Polavaram the center in its announcement yesterday made it clear that they would fund the entire cost incurred by State government after 01-April-2014.   The latest estimates on the project say that it would cost 32000 Crores.  Now that center has made it clear that they would fund it either by NABARD or other banks. It is a welcome move. The state gets to construct the project and bills are cleared by the center. Isn’t this a good thing.

We are gaining another 32000 crores here.

Issue 3 : Educational Institutions.
Here is the staus of the various educational institutions promised to the state of Andhra Pradesh.
1. A Petroleum University has already been established.
2. The IIT has already been functioning from a transit campus and the main campus is being constructed.
3. The National Institute of Technology has already been functioning since September 2015 in a temporary campus and its
main campus is being constructed.
4. The Indian Institute of Information Technology, Kurnool has already started functioning from the temporary campus and  its main campus is being constructed.
5. The site for the Central University in Anantapur district has already been selected.
6. The Indian Institute of Science Education and Research has been established in Tirupati.
7. The Indian Institute of Management has been established at Visakhapatnam.
8. An All India Institute of Medical Sciences has been approved at Guntur and the land for the same is being taken over.
9. A Tribal University is to be established in the State of Andhra Pradesh for which a Site Selection Committee of the State has already approved the land.
10. A National Institute of Disaster Management is being established in the State of Andhra Pradesh for which identification and takeover of the land is being completed.
11. IIT in Tirupati has started functioning.
12. Central Institute for Excise and Customs is approved and is coming up in Hindupur.

A majority of the institutions have started functioning in A.P.  and even for the others land has been identified/taken over.

Issue 4 : Construction of the Capital City

Coming to the capital, The bill says the center would fund the construction of Government Offices, secretariat, Govt Bungalows, Raj Bhavan, Assembly and High Court only.  It doesnot speak any other thing about the capital.  If the center were to fund only this much then even a 1000 crore rupees would have been sufficient.
However, even without the beginning of any construction work the center has given 2500 crores till date and they are promising 1000 crores more.

This money is not sufficient to build a capital city. The center needs to give more.  As per bill this might be enough, however it is never enough if you want to honour the promise in spirit.  This is where we ought to receive more money from the center.

Issue 5 :  Tax exemptions
The finance minister in his speech yesterday has clearly said that Tax department would give a notification on the tax concessions being provided to AP. We can speak only after it is out.

Issue 6 : Financial assistance to the backward districts of AP.
Center has release 1050 crores till date and has promised to release 1050 crores more for the 3 districts of Uttarandhra and the 4 districts of Rayalaseema.

Again, 300 crores per district for a period of 5-6 years is o.k but not great.  I personally feel that the center must have doubled the grant.

Issue 7 : Revenue Deficit

I request you to read the central draft in this regard, it is available here.
http://www.eenadu.net/Central%20Assistance%20to%20ap.pdf

Here is what the center says in this regard.

The Fourteenth Finance Commission defined the financial relationship between Centre and the States for the five year period ending 2019-­20. The Commission did not make a distinction between Special and General Category States. Its approach was to fill the resource gap of each State to the extent possible through tax devolution. Accordingly, the Commission recommended an enhanced devolution of 42% of the Central Government’s tax revenues to States. If devolution alone could not cover the assessed gap, for certain States, a revenue deficit grant was provided. Andhra Pradesh was one of the States determined to be a revenue deficit State, and the Commission recommended that the Centre would provide revenue deficit grant for the period of the Fourteenth Finance Commission. The amount of deficit for each year was mentioned in the report itself and a total of Rs.22,113 crores is to be paid to Andhra Pradesh as revenue deficit grant for the 5 year period.

The same document towards the fag end says.

The Fourteenth Finance Commission’s award came into effect from 1.4.2015. The enhanced devolution amount due to Andhra Pradesh is being paid in entirety. This has resulted in an increase of Rs.7,787 crore in tax devolution in 2015-­16 compared to 2014-­15, a growth of 55%.  The revenue deficit grants for each of the years recommended by the Fourteenth  Finance Commission will also be paid by the Government of India to the State of Andhra Pradesh. The same has been done for the year 2015-­16 and 2016-­17. There are no issues pending on that score.

So isn’t the center promising another 22,113 crores here.  That’s what is my understanding. Please correct me incase I am wrong.

Issues 8,9&10 : The center is saying that feasibility study reports are negative in these cases.  I personally feel that it is not correct. The Center should ensure that these projects come to AP.  Particularly the railway zone must come to Visakhapatnam under any circumstances.

All in all, I feel that the center has done a decent job in providing assistance to AP.  They did not do a great job and there are many things that are pending.  Yes, a lot more should be done but then they are in power for only 2 years. Hence, I feel that  we need to give credit to the government for the good things it did and also have a plan to get the things that are either in pending or in cold storage mode.

When the state was getting bifurcated some leaders brought in a samaikhyandhra movement and fooled people.  They knew that they would not be able to stop the bifurcation but then they did rallies and fooled the public.  Today, the same leaders are turning the special category status into the silver bullet for all the ills of AP. I request the people of AP not to fall into this trap.  There are some good things that have come our way.  There are a lot of things that need to be done.  Let’s acknowledge the good ones and fight for the ones that we need to get.  Let’s not carve out villains and heroes here, lets get to the negotiation table and claim our share of rights.

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