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All you need to know about Andhra Pradesh’s ‘special status’ demand and why TDP might be quitting the NDA Govt

Yesterday, the Telugu Desam Party (TDP) chief Chandrababu Naidu announced that two of the ministers in the central government would be resigning as the demands of the state were not being met in a late night press conference.

The press conference came after Arun Jaitley said that in place of a ‘special category’ a ‘special package’ which would be equivalent in terms of benefits could be arranged for. However, this offer did not satisfy the Andhra Chief minister. Though TDP has pulled out of the government it has still not announced its exit from NDA in categorical terms

The BJP responded to the announcement by saying that the claims of Chandrababu Naidu regarding lack of support from the centre were a lie.

Meanwhile, the Congress party has tried to gain political mileage from this ‘unfulfilled promise’ of special category for Andhra Pradesh even before the TDP and BJP’s difference came out in the public domain.

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What is special category status and why does Andhra deserve it?

While passing the Andhra Pradesh Reorganisation Act, the new state was promised a special category status by major political parties. The special category status enables the states to get special grants and higher central assistance in the implementation of central schemes. In addition to this, industries set up in these regions are given special incentives.

The feature/features that a state has to possess for special category states was earlier decided as : (i) hilly and difficult terrain (ii) low population density and / or sizeable share of tribal population (iii) strategic location along borders with neighbouring countries (iv) economic and infrastructural backwardness and (v) non-viable nature of state finances.

Since the united Andhra was getting a large share of its revenues from Hyderabad, the new state of Andhra Pradesh would lack in funds for its sustenance (Hyderabad will eventually become the capital of Telangana alone). Hence the new state of Andhra Pradesh claimed that it was eligible for special category status.

The main complaint of the TDP is that the BJP has not fulfilled the promises made to the new state under the Andhra Pradesh Reorganisation Act. As per the TDP, the state was supposed to get a special category status as per the act. However, this term is not explicitly mentioned in the act. The part X (infrastructure and special economic measures) of the Andhra Pradesh Reorganisation Act [ pdf ] says :

94. Fiscal measures including tax incentives.––

(1) The Central Government shall take appropriate fiscal measures, including offer of tax incentives, to the successor States, to promote industrialisation and economic growth in both the States.

(2) The Central Government shall support the programmes for the development of backward areas in the successor States, including expansion of physical and social infrastructure.

(3) The Central Government shall provide special financial support for the creation of essential facilities in the new capital of the successor State of Andhra Pradesh including the Raj Bhawan, High Court, Government Secretariat, Legislative Assembly, Legislative Council, and such other essential infrastructure.

(4) The Central Government shall facilitate the creation of a new capital for the successor State of Andhra Pradesh, if considered necessary, by denotifying degraded forest land.

Arun Jaitley’s press conference confirms centre’s firm support, promises special package

In a press conference held before TDP’s announcement, the Finance Minister had said that the ‘special category’ promise was made before the report of 14th finance commission report was out. Finance commission is a constitutional body which is set up every five years to decide the basis on which funds are shared between centre and states. The 13th finance commission’s recommendations were applicable to the period 2010-2015.

The 14th finance commission’s recommendations are applicable to the period 2015-2020. The report was submitted on 14th December 2014 and the centre had accepted the recommendations of the commission. It had removed the ‘special category’ as the devolution of central funds was raised from 32% to 42%. In spite of this, the commission had made provision to help out states with revenue deficits. The commission had taken the implications of Andhra bifurcation act as well into account and made specific recommendations to the centre.

The Finance Minister highlighted that Rs 5000 crores had been disbursed for the Polavaram project and Rs 2500 crores had been disbursed for constructing the new Capital for the state. He also informed the press that the tax incentives promised in the act were already fulfilled in his first two budgets. The state had asked the centre to disburse funds through NABARD and the same demand had also been accepted in principle. The details of the ‘proposal’ were yet to be finalised, the Minister said.  He went on to say that the centre stood by the promises made in the act.

Most of the central schemes are jointly funded by the central and state government. While other states contributed 40% of the money for implementation of central schemes, special category states would have to contribute only 10% of the schemes’ budget. Arun Jaitley clarified that the ‘special category’ benefits were now restricted to the 90:10 funding formula in central sector schemes. Andhra Pradesh is already getting this benefit as per the Finance Minister. Thus, the claim that BJP is cheating Andhra Pradesh seems to be unfounded.

TDP’s move could be a political manoeuvre

Since the tantrum thrown by TDP doesn’t seem to be based on financial reality, one is inclined to believe that this new posturing is a purely political manoeuvre. The opposition parties in Andhra Pradesh have been accusing that TDP has failed in getting a special status for Andhra Pradesh. The argument seems to have found credence among the people as well. Therefore in order to survive the competition and retain its position, the TDP has been forced to assert itself in the public domain and posture itself as a true representative of Andhra region. This may also be a part of a move to deny the opposition from gaining politically by whipping up the sentiments on ‘special category’.

The TDP had benefited from its alliance with BJP electorally in 2014. Considering the popularity of the PM, it is likely to benefit in 2019 as well. Probably, that is the reason for Chandrababu Naidu refraining from a complete walkout from the NDA. Instead, he has decided to walk out of the cabinet and continued to stay within the alliance. It will be interesting to see as to how TDP will play its cards in the Lok Sabha and state assembly elections in 2019.

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