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Business News/ Politics / Policy/  Has Andhra Pradesh missed the Special Category Status bus?

Has Andhra Pradesh missed the Special Category Status bus?

What is a special category status, and why is Andhra Pradesh keen on it?

A file photo of Andhra Pradesh chief minister N. Chandrababu Naidu. Photo: BloombergPremium
A file photo of Andhra Pradesh chief minister N. Chandrababu Naidu. Photo: Bloomberg

Hyderabad: The Congress is considering approaching the Supreme Court on the issue of the private member’s bill moved by its Rajya Sabha member K.V.P. Ramachandra Rao seeking the special category status for Andhra Pradesh.

The state has been demanding a Special Category State (SCS) status from the Centre ever since it was decided to carve out Telangana along with capital city Hyderabad.

Statewide protests, slogan-shouting in Parliament, a private member’s bill and intense lobbying have not resulted in a favourable decision. So what is a special category status, and why is Andhra Pradesh keen on the SCS?

What is a special category status and when was it introduced?

The concept of a SCS was first introduced in 1969 when the 5th Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks.

Initially, three states—Assam, Nagaland and Jammu & Kashmir—were granted special status but since then eight more have been included Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand.

On what basis do states qualify for special category status?

A special status is given to a state based on following parameters: hilly and difficult terrain, strategic locations along the borders of the country, low population density, economic and infrastructure inadequacies and financial unviabililty of the state.

What are the benefits states get as per special category provision?

States that come under special category status get preferential treatment in getting Central funds assistance. For instance, Normal Central Assistance (NCA), the main assistance for state plans, is split to favour special category states. The 11 states in the special category get 30% of the total assistance while the other states share the remaining 70%. The nature of the assistance also varies for special category states. NCA is split into 90% grants and 10% loans for Special Category States while the ratio between grants and loans is 30:70 for other states.

Other concessions include specific assistance-addressing features such hilly areas, tribal sub-plans and border areas. Beyond additional plan resources, Special Category States may enjoy excise duty concession and other such tax breaks to attract industries.

Which other states are now seeking special category status?

While Andhra Pradesh has been in the news lately because of a series of protests by MPs from the state and the private member’s bill moved by the Congress, other states such as Bihar, Jharkhand, Chattisgarh and Odisha have sought the Special Category State status. However, the Union government has not obliged any of the states because they did not fulfil criteria.

Why has SCS become an emotive issue in Andhra Pradesh?

Andhra Pradesh is still nursing the wounds of a bitter division process that saw Telangana being carved out of erstwhile Andhra Pradesh in June 2014. With Telangana going to Hyderabad, the economic powerhouse of Andhra Pradesh that houses several information technology, pharmaceutical and public sector units. Hyderabad contributed to the bulk of erstwhile state’s revenues.

Running a revenue deficit and no capital to boast of, Andhra Pradesh was banking on the Special Category Status to attract investments to the state. A special category status would have been beneficial to the state because there is no other state in the vicinity of Andhra Pradesh. This would have given Andhra Pradesh room to offer attractive incentives to woo businesses to the state, which has the second biggest coastline in the country and the largest on the country’s eastern coast.

What does AP Reorganisation Act say about special category status to Andhra Pradesh?

Nothing! There is no mention of special category status to Andhra Pradesh in the Act. The assurance of special category status came on 20 February 2014 on the floor of the Rajya Sabha by the then prime minister Manmohan Singh, who orally communicated to the House that the Centre would grant AP special category status for a period of five years. The Bharatiya Janata Party (BJP), subsequently, during the 2014 general election campaign promised to extend AP’s SCS to 10 years. Now, Andhra Pradesh wants the Centre to honour the prime minister’s word made in Parliament.

So, why is the BJP reluctant?

In early August, Union finance minister Arun Jaitley did not explicitly rule out the special category status to Andhra Pradesh. Speaking in the Rajya Sabha, Jaitley tight fiscal conditions and rules make it difficult to grant special category status to Andhra Pradesh. Earlier in April, former minister of state for finance Jayant Sinha said the Union government would not modify criteria for granting special category status. He also pointed out that there are more inflows flowing into Andhra Pradesh following recommendations of 14th Finance Commission. Besides, the Union government is worried that granting SCS to Andhra Pradesh as a special case may open a can of worms and trigger similar demands from other states.

What is the 14th Finance Commission and how does it change the game?

The Union government reasons that the 14th Finance Commission increases states’ share of central taxes from 32% (in 13th finance commission recommendations) to 42% suggested by 14th finance commission. In view of the increased devolution of Central assistance, it does not make any sense to grant SCS to Andhra Pradesh, according to the Union government. Andhra Pradesh also gets additional 350 crore annually for the seven backward districts in the state. The Andhra Pradesh Reorganisation Act states that the Central government would support programs for development of backward areas in both divided Andhra Pradesh and Telangana.

Why is the AP government still unhappy?

For one, special category status has become an emotive issue in the minds of the general public in the state. People feel wronged about the Central government not keeping its word made during the state’s bifurcation. Majority of people from Andhra Pradesh were not willing parties to the state’s bifurcation. Further, the Andhra government says the Centre has not bridged its revenue deficit for the last two fiscals. Chief minister N. Chandrababu Naidu is also unhappy with the trickle of Central funds to capital Amaravati, his dream project, and for Polavaram irrigation project, which was accorded national project status in the AP Reorganisation Act. This means that the Central government will take responsibility for executing the project.

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Published: 18 Aug 2016, 03:11 PM IST
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