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Why Andhra Politicians Should Stop Fretting Over Special Category Status

01/08/2016 10:32 AM IST | Updated 02/08/2016 12:54 PM IST
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The issue of Special Category Status to Andhra Pradesh has rocked the Rajya Sabha over the past two weeks, following a Private Member Bill introduced by Congress MP KVP Ramachandra Rao and then as the Upper House took up the matter as a short duration discussion. In an attempt to portray themselves as the true representatives of the Telugu people, the Congress, BJP and Telugu parties are all pointing fingers at each other for the financial troubles of the new state. The latest addition to the debate around Special Category Status came when the Finance Minister, while refusing to grant Special Category Status to the state, cited a "constitutional position" created by the contrary nature of assurance given by the then Prime Minister Dr. Manmohan Singh and the recommendations of the 14th Finance Commission.

Bifurcation of Andhra Pradesh

The state of Andhra Pradesh was divided into Telangana and Seemandhra (now bifurcated Andhra Pradesh) by the United Progressive Alliance government in 2014 through the Andhra Pradesh Reorganisation Act. The division of the state raised passions, both on the ground and in Parliament. The Lok Sabha was witness to unruly scenes, with one MP even using pepper spray to stall the passage of the Bill. The Bill was later passed amid a din and a blackout of live proceedings of the Lok Sabha.

The context in which Special Category Status was promised to Andhra Pradesh in 2014 has changed now.

The Rajya Sabha was much more temperate and passed the Bill after Prime Minister Manmohan Singh gave six assurances over and above the promises made in the Reorganisation Act. One of these assurances promised grants and tax incentives generally given to the Hill and Border states i.e. Special Category Status to Andhra Pradesh.

Despite the BJP leadership supporting the demand for Special Category Status for the state at the time of bifurcation, the matter continues to be in limbo. Political parties in Andhra Pradesh raise the issue every now and then to give voice to the sense of betrayal felt by the people of the state.

Prime Minister's Assurance vs. Finance Commission Recommendation

The context in which Special Category Status was promised to Andhra Pradesh in 2014 has changed now. The Prime Minister's assurance to the Rajya Sabha for award of Special Category status to Andhra Pradesh was made at a time when the quantum of funds transferred from the Centre to the states was based on whether a state was under Special Category or General Category. As per an RTI application filed with the NITI Aayog, up to 2014-15, 56.25% of the Normal Central Assistance was distributed among the 11 Special Category States and the remaining 43.75% among the 18 General Category States. Special Category States were also provided with Special Plan Assistance and Special Central Assistance with the grant component as 90% and 100% respectively while the grant component was only 30% for the General Category States.

However, the 14th Finance Commission (a constitutional body under Article 280 of the Constitution, formed every five years to recommend devolution of funds from the Central pool of taxes to the states and the criteria for distribution of funds between the states) in its recommendations for 2015-20 has done away with the distinction of Special and General Category States.

The 14th Finance Commission has increased the states' share of Central Taxes from 32% to 42% while completely subsuming the funds that used to be transferred to the states under the Normal Central Assistance, Special Plan Assistance and Special Central Assistance. These lines of transfers from the Centre to the State were administered by the erstwhile Planning Commission. NITI Aayog, the institution set up to replace the Planning Commission, only acts as the government's think tank and does not have the Planning Commission's power to allocate funds.

Even if the FM was to grant Special Category Status, it would mean nothing in the absence of the funding mechanism that used to support Special Category States.

In this context, even if the Finance Minister was to grant Special Category Status to Andhra Pradesh, it would mean nothing in the absence of the funding mechanism that used to support Special Category States. The increased devolution of taxes from 32% to 42%, along with grants in aid for revenue deficit, has ensured that Andhra Pradesh will receive untied funds to the tune of ₹2,06,910.65 crores from the Central Government during 2015-20.

How can Andhra Pradesh access more funds?

There are two ways in which political parties can ensure that the state gets its due. First, the Andhra Pradesh Reorganisation Act mandates the Centre to support the state government in setting up ports, industrial complexes, infrastructure for the new capital city, irrigation projects like Polavaram, a railway zone and educational institutes such as IITs and IIMs. The state should ensure that the central government delivers on these promises in an expeditious manner.

Second, the state government can seek enhanced funding from the Centre through Centrally Sponsored Schemes. The 14th Finance Commission has not made any sector- and area-specific grants, but has proposed a new institutional framework in the form of the Inter-State Council comprising the Prime Minister, cabinet ministers and chief ministers of states to work towards, "(i) identifying the sectors in the States that should be eligible for grants from the Union, (ii) indicating criteria for inter-state distribution, (iii) helping design schemes with appropriate flexibility being given to the states regarding implementation and (iv) identifying and providing area-specific grants."

The state government can evolve consensus at the Inter-State Council and seek special funding for its backward regions and a liberal resource allocation under Centrally Sponsored Schemes. The Finance Commission recommendations do not restrict the Centre in designing Centrally Sponsored Schemes in any way that it feels would fulfil the promises made to the people of Andhra Pradesh.

However, for any movement beyond the now absurd demand of Special Category Status, political parties in Andhra Pradesh will have to stop playing to the gallery. They should instead put pressure on the central government to give the state its due under the new "constitutional position" that has developed after the recommendations of 14th Finance Commission came into force.

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