Why Andhra Pradesh suffers from bifurcation blues

February 20, 2014 marked a red letter day in the prolonged and turbulent struggle for creation of separate Telangana state, with the Rajya Sabha passing the Andhra Pradesh Reorganisation Bill.

Ironically, it was also a day that sowed the seeds of discontent in the residuary AP for losing out heavily in the process of bifurcation, particularly the loss of Hyderabad, the economic powerhouse, to Telangana. Five years later, it is time for bitter harvest.

A deep sense of hurt and betrayal has taken over the state over unkept promises and unfulfilled dreams with both the national parties becoming the targets of public wrath — Congress for “hasty, clumsy and unscientific” division of the state and BJP for denying the Special Category Status as promised earlier.

On June 2, 2014, Telangana state took birth, comprising ten out of the total 23 districts in the united Andhra Pradesh.

As part of the Reorganisation Act, a set of promises was made to “handhold” Andhra to tide over the bifurcation blues, including financial assistance to bridge the deficit, special incentives for promotion of industries, help for building a new capital city, infrastructure projects and setting up of a string of educational institutions.

Bitter war of words

Five years later, what the state has been witnessing is a bitter war of words between the allies-turned-foes — the Telugu Desam party and the BJP — over the fate of assurances made at the time of the division.

Notwithstanding the claims and counter-claims, the ground reality is that the ambitious capital city project — Amaravati — is yet to take off as planned and the work on establishment of new institutions, infrastructure projects and industries is at a snail’s pace.

While BJP president Amit Shah has claimed that the NDA government had fulfilled “about 90%” of the assurances given in the Reorganisation Act, the TDP leaders have accused the Centre of “betraying and cheating” people and of failing to keep up promises.

“The Centre has spent over ₹56,000 crore to develop AP in the past five years. It has allocated 20 educational institutions to the state, besides releasing adequate funds for the construction of Amaravati and the Polavaram irrigation project. We have developed Rajahmundry airport and the Kakinada port with modern facilities,” the BJP president claimed.

In fact, the counter-allegation against the TDP government is that it had failed to spend the central funds and submit the utilisation certificates and wasted time and resources on making grandiose and impractical plans.

Pittance for Amaravati

“The Centre has released only ₹1,500 crore towards capital city project while it is its statutory duty to provide adequate funds under the Reorganisation Act. Even the assured amount of another ₹1,000 crore has not been released,” state finance minister Y Ramakrishnudu said.

AP had sent a detailed project report seeking ₹62,623 crore from the Centre for construction of Amaravati under Section 94(3) of the Reorganisation Act.

A proposal seeking a special package of incentives to promote industrialisation and economic growth was submitted to the Centre in June, 2014 but no action has been taken till date, the minister said.

“None of the 14 key assurances that are part of the Reorganisation Act has been fully implemented. Only five of them are partially implemented,” a white paper released by the state government said.

Special development package for seven backward districts, Polavaram irrigation project, educational and infrastructure projects, tax incentives and capital project are among the “partially implemented” assurances, the white paper states.

The Centre had earlier released ₹1,050 crore towards special development package for seven backwards districts in Rayalaseema and north coastal regions. Another ₹350 crore released in February last year was “taken back unilaterally” without consulting the state government and no funds have been released in 2017-18 and 2018-19, said the finance minister.

As against ₹12,747 crore required for setting up 11 educational institutions, as promised under the Reorganisation Act, only ₹845 crore has been released by the Centre. “At this rate, it will take 20 to 30 years to establish these institutions in a full-fledged manner,” Ramakrishnudu contended.

Out of the eight infrastructure projects promised, only three are in the initial stages of implementation — Vizag-Chennai industrial corridor, expansion of Visakhapatnam, Vijayawada and Tirupati airports and road connectivity from the new capital.

The issue regarding division of 142 state institutions remains unresolved due to “non-cooperation” from the Centre and Telangana government, it is argued. So is the case pertaining to the removal of anomalies in taxation matters. “As a result, we are put to a loss of ₹3,820 crore,” Ramakrishnudu said.

“The resource gap funding to the tune of ₹12,099 crore, financial support for new capital and special development package of ₹23,300 crore are due from the Centre,” the white paper said.

“The bifurcation has resulted in AP losing Hyderabad, which was developed by successive governments for nearly seven decades. This, coupled with an absence of a large industrial base and educational institutions and infrastructure base, has [caused] a deep sense of hurt and anguish among the people. Lack of transparency in the reorganisation process has caused serious disenchantment,” it said.

Injustice to AP

Talking about the injustices done to the state and the inconsistencies in the Reorganisation Act, Ramakrishnudu said that it received only 46% of the revenues of the combined AP while accounting for 58% of its population as confirmed by the 14th Finance Commission. The assets were allocated on location basis while debt liabilities were distributed on population basis.

Similarly, refund of taxes was to be shared between Telangana and AP on population basis but were allocated on location basis. “This has caused a loss of ₹3,800 crore,” Ramakrishnudu claimed.

Special category status

More important than the assurances made in the bifurcation act was the promise made by the then Prime Minister Manmohan Singh on the floor of Parliament to grant Special category Status (SCS) for five years to “put the state’s finances on a firmer footing”.  The BJP leaders went a step further and promised it for a period of ten years.

But, it was not to be.

Special Category states would get funds from the centrally-sponsored schemes and external aid in the ratio of 90% grants and 10% loans, while other states get 30% of their funds as grants. Besides, they would be given tax breaks and excise duty concessions to attract industries.

However, the 14th Finance Commission did away with the distinction between general and special category states since it had taken into account the level of backwardness of states in the proposed transfer of funds to states. It recommended higher devolution of central taxes to the states. The idea was that adequate resources would be allocated through tax devolution and grants to address interstate inequalities. The special category status was therefore restricted to the three hill states of Jammu and Kashmir, Himachal Pradesh and Uttarakhand and those in the Northeast. It was also decided that a revenue deficit grant would be provided for certain states for which devolution alone would be insufficient. AP was one of the states that were to be given a revenue deficit grant.

While ruling out special status to AP in the light of the 14th Finance Commission report, BJP leaders, however, maintained that the Centre was committed to granting the monetary equivalent of a special status to Andhra and would bear 90% of the share of schemes sponsored by the Centre.

With the SCS becoming an emotive issue, the TDP, headed by N Chandrababu Naidu, pulled out of the NDA in March last year. Since then, the bitterness has grown between the two parties. Congress president Rahul Gandhi has promised to grant special status if his party was voted to power at the Centre.

“The special assistance offered by the Centre is far higher than what AP would have got under SCS,” says BJP’s AP unit president Kanna Lakshminarayana.