Andhra Pradesh : A 'Special' Case

A Yajna in Haridwar by YSR Congress Chief Jagan, a private member bill by a senior Congress MP, KVP Ramachandra Rao, state-wide bandhs, several high profile protests outside Parliament and two and a half years of nagging for 'special status' have culminated in the announcement of a special package for Andhra Pradesh (AP).

Chief Minister Chandrababu Naidu has welcomed the financial package but claims that it is not enough. He described the people of AP as wounded soldiers who deserve more. The bifurcation has not just hurt their prospects but also their pride. However, the ruling party TDP seems to have forcibly reconciled. The special financial package is now being trumpeted by the Centre as the Sanjeevani which shall lift the state up from its current levels of economic and fiscal backwardness.

Before embarking on the slippery slope of making a case for AP's special treatment, it is important to legitimise the motive for seeking this position. According to the BN Srikrishna committee, the Seemandhra region is economically weaker than Telangana. The per capita income of Telangana including Hyderabad(Rs.27,006) in 2008 was Rs.4000 and Rs.500 higher than Rayalaseema and Coastal Andhra respectively.

In the undivided state of AP, a lion's share of commercial and industrial activity was concentrated around Hyderabad, which territorially belonged to Telangana. Therefore, the entire revenue from Hyderabad (>75% of overall tax collections) was generously credited in favor of Telangana irrespective of which region the investments came from. The rationale was apparently to ensure the economic viability of Telangana and prevent any demands for reunification. And tragically in this process, the successor state of AP became the sacrificial goat.

To compensate, the then Prime Minister Dr. Manmohan Singh during the Rajya Sabha debate on the AP Reorganization Bill, offered 'special category status' to the successor state of AP for 5 years. This episode saw Mr. Venkaiah Naidu coming to the rescue of Seemandhra, almost as if he were Lord Krishna saving Draupadi's honour. His impassioned plea forced the PM to make a solemn promise on the floor of the house for extending the benefit to the state for 10 years.

Despite this positive bipartisanship, the Centre has reneged on its commitment. And as Jana Sena leader Pawan Kalyan points out, the special package is nothing but rotten laddoos, Here's why:

Irrigation Benefits

Under the Accelerated Irrigation Benefit Programme (AIBP), ‘Special Category States’ get 90 per cent of the project cost as grant, compared with 25-50 per cent grant for others. There are also provisions for the Centre bearing the burden of sovereign loans for externally aided projects.

In AP, which is heavily dependent on agriculture, there are 28 major and medium irrigation projects pending, apart from numerous minor/lift irrigation projects. The Irrigation Ministry projects that they require an investment of Rs. 25,000 crore for timely completion. But, the special package talks only about Polavaram and is silent about the others.

Businesses get a raw deal

All special category states (SCS) were provided an income tax holiday for the new industrial units (expansion included) for 5 years and in the case of Northeast, for 10 years. A similar holiday on excise duty was also granted but curtailed to 7 years. In some states, the insurance premium paid on capital assets was reimbursed and power was supplied at 50% of the price. These incentives immensely helped the SCS's in bridging the industrial divide they suffered with respect to other states.

Himachal Pradesh has attracted 300 percent more investment as compared to the pre-incentive package period. The number of units set up had grown by 28 percent. Growth in employment generation was more than 33 percent. In Uttarakhand, investment generated was 42 times the level in 2000. The number of units set up had grown by 130 percent, while growth in employment generation was 490 percent for the same period.

Even in a politically turbulent state like Jammu and Kashmir, over 8000 industrial units came up. The manufacturing growth in Assam was 6.95% from 2011-12 to 2013-14 as against the country average of 0.42% for the same period.

Yet, the only benefits extended to businesses under the 'special package' for AP have been an additional depreciation allowance of 15% for the first year and an investment allowance of 15%. This is woefully inadequate for creating a vibrant business environment. In the first two years, only 1.2 lakh out of the promised 10 lakh jobs could be created.

Speaking at a Partnership Summit of the CII and AP Government, Finance Minister Mr, Arun Jaitley said that Telugu people are highly enterprising. But the animal spirits for local private investment need to be kindled. Given the right impetus, they could lead the transformation of AP from an agrarian to an industrial economy and generate the required employment for its youth.

Humble Appeal

Implicit in the demand for 'special category status' were the central irrigation assistance and the business incentives. This is what people mean when they are demanding 'special status' for AP. The special package to a large extent, is only a reaffirmation of the AP Reorganization Act with additional funds for bridging the revenue deficit and building the capital. It was uncharitable of the Centre to address only the fiscal end of the problem and ignore the economic one.

The Centre's decision of granting more paisa to AP might benefit the ruling party and its crony contractors. It is in the interest of BJP which aims to gain ground in the state, to gather the necessary political will and courage to stand up for AP. The least which can be done to correct the historical injustice of bifurcation and not risk a mass political agitation, is grant AP its fair share, whether they wish to call it 'special category status' or not.

Borrowing the words of Allama Iqbal, States are born in the hearts of poets, but they prosper or die in the hands of politicians. The choice is yours, Mr. Prime Minister.

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