Losing mind over Special Status?

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The noise surrounding the demand for Special Status for Andhra Pradesh is getting louder by the day. The demand is being portrayed as the only solution for the new state. But, is this true? Let’s look at the demand since inception.

Special Category Status was promised by former Prime Minister Manmohan Singh on the floor of Rajya Sabha, without making it a part of the Andhra Pradesh Reorganisation Bill, 2014. While the Congress conveniently got away with stating that it would help in implementing the Special Status promise, it cleverly skipped out that point in the Bill.

Meanwhile, M. Venkaiah Naidu and Arun Jaitley of the BJP only managed to get an assurance from the UPA government at the time of bifurcation but couldn’t compel them to include the Special Status provision in the Bill. However, the BJP made public statements about implementing the Special Status promise, trying to pacify the people of Andhra Pradesh who were seething with anger after unjust bifurcation.

During his election campaign tour in Andhra Pradesh, even Prime Minister Narendra Modi had promised that the BJP government would support the development of Andhra Pradesh and the construction of its new capital. Despite the people of the state believing that Special Status is their right, there is no legal basis to it because it is neither mentioned in BJP’s election manifesto nor in the AP Reorganisation Act, 2014.

The demand for Special Status in political circles crops up because of the lack of industries in the state, post bifurcation. With Hyderabad being a major industrial base before bifurcation, jobs and ancillary units have been concentrated around the city. Therefore, Andhra Pradesh remains stripped of such opportunities and is devoid on any major industries.

In addition, the new state of Andhra Pradesh started off with a revenue deficit of nearly Rs. 20,000 crore. In the 2015-16 Budget session, the 14th Finance Commission came up with a revamped policy of higher devolution of central tax revenues to the states and declared that it would allocate Rs. 22,113 crore to AP to fill the revenue resource gap over a period of five years (from 2015-2020).

Even considering this assistance from the Centre to AP, the state would still face a net yearly loss of thousands of crores when compared to other states with surplus revenue. This is one of the reasons why the state requires additional financial assistance for the next ten years to boost its revenues on par with other progressive states. (Clause 46 (2) and (3) of the Act).

However, this does not mean that Special Status is an answer to all of Andhra Pradesh’s problems. A glance at 11 states that have been granted Special Category Status (SCS) will help us understand that these states, despite being awarded SCS, are not been better off. The advantages that SCS states have are that 90% of the funds allocated as grants need not be paid back, concessions in excise and custom duties, tax concessions for I-T rates and industries.

Given that Andhra Pradesh is a medium-income, progressive state with availability of massive resources, a 972 km coast and good connectivity, it is imperative that the state demands for industrial tax concessions (Clause 94 (1) of the Act) along with implementations of all the assurances in the Act. Further, the state should also seek a royalty from the gas extracted from the KG basin on lines of states that receive royalty for extracted coal (Clause 92 of the Act).

While Andhra Pradesh does need the Centre to complete the Polavaram multi-purpose irrigation project (Clause 90 (4) of the Act) and other crucial projects in the Act, it also should also be able to work with the Modi government in attracting investments into infrastructure and transportation, energy, defence and aerospace, ports, food processing, higher education, electronics manufacturing, PSUs, marine and tourism sectors (12th and 13th Schedule of the Act).

This strategy will help in shoring up revenues of the state, create employment and help Andhra Pradesh gain momentum as an investment hub, apart from helping it offset revenue loss caused by bifurcation. In such a scenario, the Centre needs to be generous towards helping Andhra Pradesh by pumping public investments into the state. This will not only create a win-win situation for both, the Centre and the State, but at the same time, dismiss the demands of other states for Special Status.

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