Andhra Pradesh Special Category Status
|Andhra Pradesh Special Category Status|
|Enacted by||Parliament of India|
|Status: In force|
Andhra Pradesh Special Category Status is an important aspect of the Andhra Pradesh Reorganisation Act, 2014 that bifurcated the state of Andhra Pradesh into Telangana and the residuary Andhra Pradesh state.:.
This specific term has become a political issue in Andhra Pradesh and has gained national attention due to the interference from all Andhra Pradesh parties to the proceedings of the parliament in 2016. The parliament was set to take up a key legislation to the Government's reform agenda – the GST bill and this bill was being blocked by the proceedings of a "Private Member's Bill" submitted by a Congress Member of Parliament Mr. K.V.P Ramachandra Rao. This private bill requiring the granting of Special Category Status garnered wide spread support from states that fear their future bifurcation (TMC and SP) and from all parties in Andhra Pradesh (including the Telugu Desam Party which is a part of the central government). The support for this private member's bill and its interference with GST proceedings are seen as a wedge between the partners in Central Government (TDP and BJP).
State Special Category Status
Fifth Finance Commission introduced Special Category Status (SCS) in 1969 giving Jammu and Kashmir, Assam, and Nagaland additional Central assistance and tax concessions. The National Development Council (NDC) laid five guidelines to grant the status —
- hilly and difficult terrain;
- low population density or sizable share of tribal population;
- strategic location along borders with neighboring countries;
- economic and infrastructural backwardness; and
- non-viable nature of State finances.
Eventually eight more States were added to the list — Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand.
The SCS are allotted 30 per cent of Normal Central Assistance and the remaining 70 per cent is split among other States based on their population, per capita income and fiscal performance using the Gadgil formula. The SCS enjoy concessions in excise and customs duties and income tax rates. In addition to this, the Plan panel may allot more funds to these States to carry out centrally-sponsored schemes (CCS) and special projects, if any. The SCS will have to spend 10 per cent for CCS, while the rest will be borne by Centre.
Origin of Special Category Status issue for Andhra Pradesh
During the legislative battle for the bifurcation of A.P., Andhra lost a large volume of its revenue due to Hyderabad remaining the capital of Telangana.
Since 1956 all the development of the state has been focused around the Hyderabad metropolitan area. Almost all the debt accrued and development funds spent in the united state were spent on creating infrastructure in and around Hyderabad. A large volume of private investment especially from the residual Andhra region flowed into Hyderabad. This phenomenon took an even more pronounced importance between 1995–2004 with an emphasis on building the High Tech sub city around Hyderabad. This emphasis required the diversion of all resources especially the rivers towards Hyderabad away from their natural deltas.
During the 1995–2004 period the naturally rich deltas that now form the residual state became financially UN-vialble entities starved of all development.
In a debate in the Rajya Sabha on the A.P. Reorganization Act on February 20, 2014, When the issue of Hyderabad and the impact on the bifurcation on the residuary state was discussed, the then Prime Minister Dr. Manmohan Singh had made a pledge in the legislative house that SCS would be “extended to the successor State of Andhra Pradesh ... for a period of five years.” This oral submission by the then PM has been the basis for A.P.’s claim to the status.
Special Category Status Becomes a Buzz word
The Special Category Status is a well defined budgetary term in Indian central government annual planning. Due to the acrimonious reorganization of the erstwhile united Andhra Pradesh, the word crept into popular vernacular especially in Andhra Pradesh political discussion. It now represents a buzz word meaning "special treatment for Andhra Pradesh to make up for the insults and injuries heaped upon Andhra Pradesh during bifurcation".
While outside Andhra Pradesh there is a debate on the topic of pros of the bifurcation of Andhra Pradesh (decentralized development etc.,), in Andhra Pradesh there is unanimity in the attitude towards the bifurcation. The Congress party which ruled Andhra Pradesh 52 out the 69 yrs since independence and was in power at the time of bifurcation lost the recent election garnering 2% of the popular vote in Andhra Pradesh. 98% of Andhra pradesh does not agree on any thing at all except that Bifurcation is an insult and injury inflicted on its people.
Special Category Status is now a Buzz word meaning redress for the "insult and injury of bifurcation".
Government Denies Andhra Pradesh Special Category Status
Special Category Status (SCS) the budgeting term has gone through some radical redefinition in the Indian budgeting process. The new BJP government as a part of its reform agenda made two very relevant changes to taxation and budgeting process.
- The Central Planning Commission usually staffed with central government bureaucrats was replaced with NITI Aayog staffed by bureaucrats from each of the states of the union. This key reform was aimed at decentralized planning.
- Goods and Services Tax Bill GST is a new taxation regime radically different from the earlier regime. This regime aims at creating a unified market for good and services in India.
While these two reforms received broad support, they had specific impacts on the budgetary "SCS" term. Prior to NITI Aayog, 32 percent of the taxes collected by states were sent back to the states. That number changed to 42% under the new regime leaving less money to help SCS states. Many of the formerly Non-Viable states will fail to meet the Non-Viability test due to the additional 10% devolution of resources. Prior to GST, it was possible for the center to give special tax exemptions to individual states in SCS. GST forebids it to create a level playing field among states.
The new NITI Aayog a body that gives all the states a voice in national budgeting reviewed Andhra Pradesh's claim for SCS and concluded that
- There were too many objections from neighboring states fearing industrial flight to Andra Pradesh's tax haven.
- SCS does not confer the same benefit it once did and is less useful now
- 42% devolution addresses many of the former SCS needs.
In the context of the above NITI Aayog recommendation, BJP decided to not grant Andhra Pradesh Special Category Status. Instead it decided to design a Special package of grants that would give the same quantum of benefit to Andhra Pradesh as the former (pre NITI, GST) SCS would have conferred on Andhra Pradesh. A decision to this effect was release by the finance minister on 8th September 2016 in a quick mid night news conference.
Government defines a Special Package to replace the Special Category Status
Arun Jaitley the finance minister of India outlined a Special Package to replace the SCS status that Andhra Pradesh has been seeking. The breif press conference was in the form of a list of statements:
- Andhra Pradesh has lost significantly due to the bifurcation, our government is committed to help it withstand this loss.
- There are four source documents that guide us in defining this package, the bifurcation act, the former prime minister's statement, NITI Auyog recommendations and SCS committee recommendations
- The government cannot provide the SCS status due to NITI Auyog recommendations, but we will compensate the state in equal amount by taking over any loans that Andhra Pradesh gets from external funding sources (international). Availing these external loans still needs central government clearance. This facility will be available for five years and its worth will depend upon Andhra Pradesh's ability to get approvals for loans from International organizations and the central government.
- A promise made in the bifurcation act for granting higher education institutes (all of which were in Hyderabad before bifurcation) will be met. We already granted approvals for 11 of the 13 institutions mentioned and the remaining two will be granted as soon as possible.
- The promise to fund Polavaram irrigation project in the bifurcation act will be upheld by the government and all expenses on that project will be reimbursed by the central government starting with 2014. The project will be managed and delivered by the state government and will be funded by a loan from National Rural Infrastructure bank.
- We have helped Andhra Pradesh build a working capital city with a grant for Rs 2500 Crores ($ 370 Million ) and will we with further allocate another Rs 1500 crore ($230 Million) for its completion.
- We have provided Rs 3975 Crores ($ 600 Million) towards revenue deficit during the first year of Andhra Pradesh and we will pay the rest of the money due from the bifurcation law in three further installments.
- We have granted Rs 50 Cr ($ 8 Million) per district per year for the seven backward districts in Andhra Pradesh and will continue to do so as the bifurcation law requires us to do so.
- Industrial tax subsidies (their status may change in a few months due to GST regime) for profit making industries that pay AMT (minimum tax) to the tune of 30% has been extended with immediate effect to Andhra Pradesh (It has already been extended to Telangana).
- Various other promises in the bifurcation act are under consideration by the respective departments for a feasibility study, including a railway zone, industrial corridor for the Banglore – Chennai and Vishakapatnam – Chennai areas. Petroleum refining capability in the Kakinada area and decision will be taken on them based on feasibility by the respective ministry.
Andhra Pradesh simmers
All the political parties in Andhra Pradesh expressed great displeasure with the announcement from the government of India. A general strike was called for by all the political parties in Andhra Pradesh except the BJP -TDP combine. The ruling party's ally in Andhra Pradesh the TDP president Mr. Nara Chandra Babu Naidu declared that he would "Thank the central government for what was offered, take what was given and continue to fight for what is due".
Indian Democracy and Federal System depends upon civility that needs to be restored:
- The passing of the law by a government while a no confidence motion was pending with all the MPs from the residual state expelled and behind closed doors needs to be declared treasonous and parliament needs to formally apologize and prosecute Meera Kumari for treason.
- A life time ban should be imposed on all Members of Parliament that participated in any un-parliamentary behavior during the bifurcation vote.
- The British built Indian Parliament needs to be demolished and all parliamentary activities need to be temporarily moved to Amaravati for a period of 10 years.
- Indian constitution needs to be amended to restrict the tenure of all non-lokshaba members eligibility for executive posts (ministers and prime ministers) to be a maximum of six months.(They have to get elected by the people to hold those positions beyond six months)
- Uttar Pradesh, Tamilnadu, Maharastra, Bihar and Bengal need to be be promptly bifurcated to administrative units no larger than 25 MPs strong.
- India's growth and urbanization needs more than half a dozen mega cities, Industrialization tax waivers need to be extended to 20 states that do not have mega cities post bifurcation.
- Water sharing principles for rivers need to be debated and a consistent national constitution for all river management needs to be formalized – with respect for the special environmental status of deltas.
- Offshore drilling assets need to have the attached states representation in ownership.
- All central government bodies except Defense, Foreign affairs, Federal Tax collection and Interstate crime and Central Courts need to be moved to be admistered by NITI Ayug like bodies
- Political entities that garner less than 2% votes in a state election or less than 5% in two consecutive state elections should be de-listed by election commission at state level.
The bifurcation act itself is a travesty using it as the basis for declaration is insufficient. The act has to be amended to account for some gross negligence in the following ways:
- The debt of the combined state was partitioned based on population ratio. The assets were divided based on location with Hyderabad and its revenues going to Telangana. Telangana with 40% of the population got 53% of the assets and 40% of the debt leaving it with a debt service ratio of 17%. Andhra Pradesh with 60% of the population got 47% of the assets and 60% of the debt leaving it unable to pay debt servicing and making it a heavily indebted state with 28.3% debt servicing ratio. The debt was raised to buy assets all of which are in Telangana but the bill is with Andhra
- The citizens of the united state moved and built lives in Telangana and now being called non-locals and are being denied jobs and educational opportunities. Every one with a Telangana address at the time of bifurcation should be declared Telangana locals in every way.
- River waters from the delta regions were liberally diverted to Hyderabad and various Telangana projects liberally. Deltas have a special water right as specialized echo systems that need a flowing river and those unique delta rights need to be restored. Special allocations of water are needed for a new capital city and new industrial corridors. Lake Kolleru an natural wonder should be restored to its full former self with assured inflows.
- Industrialization needs infrastructure , incentives and infrastructure spending in Andhra Pradesh should counter the advantages of Banglore, Chennai and Hyderabad till Andhra Pradesh industrializes to the same extent as its neighbors other wise all the industries will continue to migrate to existing infrastructure.
- Badrachalam a province of Andhra Pradesh was re-organized into Khamman for administrative convenience in 1956, it needs to be restored to Andhra Pradesh in full including the temple city.
- Nagarjuna sagar was built with private money from Guntur Zamindhar on private land and has to be given to Andhra Pradesh for administration.
- State starved of resources has no ability to withstand natural calmities, No aid for natural calamity such as HUDHUD is included in budgetary support promised in the act. No aid for drought related farmer debt relief has been forthcoming
- Every central and state government agency needs to be built in the new Andhra Pradesh Capital.
- Capital infrastructure fund to the tune or four lakh crores ($60 Billion) needs to be setup.
- The bifurcation law was passed in a fashion that is UN-democratic and black mark on Indian Parliament. India should run every other parliament session in the new capital city of Andhra Pradesh to make mends for the fact that Indian Parliament rendered itself alien to Andhra Pradesh.
- De-centralized development makes attracting talent difficult, a centralized city with good primary educational institutions attracts talent. A special capital area primary education infrastructure fund needs to be created.
The law as written should be implemented in full in letter and spirit and currently the following short comings are noted
- Andhra's future may be bright but its short fall is immediate, a time table is needed for the promises made.
- Promises made should be given sanctity in law.
- Promises should be in terms of actual money spent not proposed on-paper projects pending feasibility study.
- Krishna and Godavari water dispute resolution tribunal is non-existant and non-functional. Center is not playing its law stipulated role in guaranteeing lower riparian state rights. This tribunal is now missing in action for two years.
- Schedule 9 and Schedule 10 asset division in the law and in the following Supreme court judgment envision an active role for center in assuring Andhra Pradesh its ownership and that needs to be resolved in a time bound fashion
- Educational institutions that are approved are not funded. The loss of educational opportunities is immediate and promise of future institutions as un-funded huts is un-acceptable
- The loss of housing and farm land in the capital city area is immediate and lack of infrastructure in the capital city area is an unfunded promise. Annual allocations are an immediate need. Two years of neglect caused countless loss of life and livelihood
- Polavaram funding is abysmal. So far 500 crores has been granted for this 30,000 crore project and the grant is stuck in bureaucratic fight on the definition of project scope. All aspects of Polavaram, Rehabilitation of submerged areas, electric and water distribution parts of the project should also be center's financial responsibility. The law states all permissions are deemed granted, yet center and Orissa government are being allowed to introduce procedural hurdles. All proposed submerged area needs to be transferred to Andhra Pradesh to reduce complications to the project.
- Industrial infrastructure promised is stuck under feasibility study politics with the most important projects stamped as infeasible ie., Green field airport in Vizag, Railway Zone, Petroleum refinery in Kakinada, Steel plant in Seema. All approvals for industrial infrastructure are unfunded on paper promises.
- Refurbishing an old non-functional airport is UN-acceptable for the capital
- Restricting the funding of capital to just four buildings is UN-acceptable. Those building need drains, water, power and roads.
- Granted and approved money is being withheld under silly bureaucratic pretenses. Actual spend money on Andhra Pradesh does not represent even 2% of Andhra Pradesh Budget. A minimum of 30% budgetary support is implied in the law and needs to be accounted for properly.
- Number of MLAs need to be immediately increased as required by the law
- All the proposals for external funding that have be submitted so far by the government of Andhra Pradesh have been obstructed by the central government. Externally funded projects should not need additional central government approvals. The center should respect the financial acumen of Andhra Pradesh government and International financial institutions.
- Support for the capital should include roads that make the capital accessible to all areas of the state. It should also include connectivity to all major cities in the country
Andhra Pradesh political fall out of the Special Status
Andhra Pradesh politics heavily relies on movie personalities to mobilize public sentiment. The most politically active popular movie star in Andhra Pradesh declared the package stale and called for a movement to earn what is due.
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- Bill on the Official site
- As introduced in LOK SABHA Bill No. 8 of 2014
- AS PASSED BY LOK SABHA ON 18-02-2014 Bill No. 8-C of 2014
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