Time to move on from special status
When the great state of Andhra Pradesh was bifurcated in 2014 through an Act of Parliament, the Act envisaged the granting of a “special category status” to the residuary state of Andhra Pradesh. The special status would have given some special grants and sops to help the state make up some financial ground lost after the bifurcation.
Indeed, such a status was a crucial part of the AP Reorganisation Act, passed when the UPA government headed by Dr. Manmohan Singh was in office. This was because Andhra Pradesh faced a revenue deficit of Rs. 20,000 crore, because 70% of the undivided state’s revenue came from Hyderabad, which became the capital of Telangana. To be sure, Hyderabad was to be the joint capital of both Telugu-speaking states for 10 years, but in realpolitik terms, Telangana had first dibs on Hyderabad’s tax revenue because the city is located there; geography trumped the AP Reorganisation Bill.
Sadly for Andhra Pradesh, the policy of granting special category status has been discontinued as per the recommendations of the 14th Finance Commission. In its place, the central government has come up with a new funding pattern, under which states are to be given more funds from the Centre than before. Andhra Pradesh has been told by the Centre that with the states’ share of central taxes up from 32% to 42%, granting special status does not make sense. Over and above the 10% hike, the state will get a special grant of Rs. 350 crore from the Centre per year for the development of 7 backward districts — it has already received Rs. 700 crore for the last 2 financial years.
In the recently-concluded Monsoon session of Parliament, the Rajya Sabha discussed a private member’s bill. Introduced by Congress member Mr. KVP Ramachandra Rao, on special category status for Andhra Pradesh.
Responding to the debate, Finance Minister Mr. Arun Jaitley said that the Central government is at a “fairly advanced stage” of discussions with the Chief Minister of Andhra Pradesh for granting special status to the state. Mr. Jaitley said the government may reach to a conclusion in this matter “soon”. Jaitley also said that Andhra Pradesh needs to be compensated because the state received “unfair” revenue and finances at the times of its separation from Telangana. “We are at a fairly advanced stage in discussions with the Andhra Pradesh Chief Minister and will shortly arrive at a solution,” Mr. Jaitley said.
Alert readers will be aware that this newspaper has always taken the position that the people of the great state of Andhra Pradesh had chosen wisely by electing the Telugu Desam Party headed by Mr. Nara Chandrababu Naidu to office in 2014. This paper has also supported Mr. Naidu’s efforts to get the “special category status” for the state.
But I think it is time for Andhra Pradesh to move on, instead of waiting for the granting of the special status by the Centre. If the Centre grants the status, fine, but indefinite waiting is to be avoided.
I believe that Andhra Pradesh has the wherewithal, particularly the resources, to create a state with world-class infrastructure. To be sure, Andhra Pradesh will need billions of dollars to build its new capital city, Amaravati, apart from billions more to develop new ports and industrial parks. I think that barring the investment in the building of Amaravati, Andhra Pradesh should explore with renewed vigor the Public-Private Partnership (PPP) model that had worked with some success when Mr. Naidu had been chief minister of the united Andhra Pradesh.
The Naidu administration has been vigorously pursuing foreign investments, with the chief minister himself leading several delegations overseas to pitch for investments in the new state. That exercise should continue, because Mr. Naidu is probably the best brand ambassador that Andhra Pradesh has.
More importantly, Mr. Naidu and his team of ministers and bureaucrats should devise policy that would make it easier for PPP projects to become attractive and viable. Infrastructure developed by the private sector with their investment will mean that businessmen will be a lot more careful when they have skin in the game.
This newspaper has always been for free-markets, where the government’s business is not to be in business, but should play the role of facilitator. It should set the rules of the game, invite the private sector, and enforce the rules, fairly.
Andhra Pradesh and Mr. Naidu have no time to lose.