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Why Andhra Pradesh won't benefit from the special status Naidu wants for state

Will the ‘special’ status that Naidu wants for Andhra Pradesh actually benefit the state? This question has two answers. One answer is steeped in economics. The other lies in politics. Economically, the tag of Special Category State (SCS) no longer means a windfall of special funds to any state. And politically, it only supplies plenty of grist for the propaganda mill of parties.

Forty-seven years after it was first introduced, this “special” category has ceased to be anything special.

N. Chandrababu Naidu, chief minister of Andhra Pradesh. Reuters

N. Chandrababu Naidu, chief minister of Andhra Pradesh. Reuters

If Andhra Pradesh, whose demand for SCS status has now reached a peak, does manage to get it, it would only help the ruling Telugu Desam Party (TDP) boast of extracting a major concession — which it will never get — from the Centre. The BJP, an ally of TDP, will claim that it’s the Modi government that is doling out that concession. On its part, the Congress will say that it was, after all, an assurance given by Manmohan Singh in 2014. Then the party will be struck by amnesia: It will forget to mention that Singh had never come good on his hasty promise.

Till 2014-15, the SCS status indeed meant a bonanza of funds from the Centre. But the Centre virtually did away with the economic privileges attached to the SCSs from 2015-16, after the Fourteenth Finance Commission raised the share of states in central taxes from 32 percent to 42.

Yet the Centre can now take a political decision by bestowing this privilege on AP and still find enough reasons to deny the state the economic benefits that supposedly go with it.

Andhra Pradesh Chief Minister Chandrababu Naidu must know that it’s not the ‘special’ label that his state needs. What it needs is cash, and here is how he can get it. But let’s begin at the beginning.

It was in 1969 that the SCS was for the first time granted to Jammu and Kashmir, Assam and Nagaland. (This is different from the Special Status that J&K enjoys under Article 370.) Later, this indulgence was extended to eight other states: Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand.

It was the National Development Council (NDC) which bracketed states in this category, based on criteria like hilly and difficult terrain, unviable finances, low population density or huge tribal populations and strategic location on borders with neighbouring countries.

The grounds on which Naidu has been clamouring for it is that the bifurcation of the state and creation of Telangana left Andhra’s economy in a mess. While the loss of Hyderabad to Telangana not only led to a loss of nearly Rs 70,000 crore in revenue for Andhra, it also means that the state will have to build a new capital at Amaravati at a huge cost.

Naidu’s demand is prompted by the fact that the largesse that SCSs received till last year was indeed significant. In 2014-15, for instance, the centre’s Plan Budget, accounting for a quarter of all the Centre’s budgetary resources, was spent this way:

— 59 percent of the Plan Budget went as Central Assistance to State Plans.
— 41 percent went to schemes of Central departments.
— Out of the 59 percent Central Assistance to State Plans, 44 percent was transferred to states for Centrally Sponsored Schemes and 15 percent as Block Grants to states.
— Block Grants had several sub-categories that included Normal Central Assistance, Special Central Assistance and Special Plan Assistance.

In 2014-15, the SCSs received 56.25 percent of all the Normal Central Assistance, 90 percent of it as grant and 10 percent as loan. (The General Category states got the remaining 43.75 percent, but only 30 percent as grant).

And as they always did, only the SCSs got the Special Plan Assistance (90 percent of a project’s cost as grant), Special Central Assistance untied to any projects (100 percent as grant) and a 90 percent grant in the Centrally Sponsored Schemes.

Read: Chandrababu Naidu will stick to NDA for now even as discontentment with Modi grows

All this dramatically changed in the 2015-16 budget.

While states began to receive a higher share of 42 percent of central taxes, the Centre diluted the benefits that accompanied the SCS status and even slashed the outlay for Centrally Sponsored Schemes.

The higher share in central taxes was also precisely the reason the Modi government cited for rejecting Chief Minister Nitish Kumar’s demand for SCS label for Bihar in 2014. It’s another matter that states including Bihar are complaining that despite the higher tax share, they are getting less cash from the Centre than before.

Former Indian Economic Service official GR Reddy told The Hindu that it’s not politically feasible to consider special status for any new state as it will result in demands from others and dilute the benefits further.

Reddy is right. Tamil Nadu Chief Minister Jayalalithaa bristled in 2013 at the very possibility of the UPA government according special status to Bihar, ruled by a Congress ally.

And after Andhra Pradesh was truncated and the NDA government took reins at the Centre, she shot off a letter to Modi, cautioning him against acceding to the demand of his alliance partner Naidu. She said the Centre must ensure a “level-playing field” for states.

Any concessions that Modi will offer Naidu will raise her hackles. And Nitish Kumar, as well as the CMs of many states like Odisha, Jharkhand and Rajasthan who have been demanding the ‘special’ tag, too are sure to cry foul.

Modi knows better than to commit political hara-kiri by conferring on Naidu the special privilege even in its diluted form.

On his part, Naidu would be wise to demand, instead of a “special status” that doesn’t ensure funds, a “special package” that does. He must make sure that Modi would make good the commitments that Manmohan Singh made in the Andhra Pradesh Reorganisation Act 2014 in terms of infrastructure development in the state. The TDP leader would also perhaps be within his rights to demand that the Centre shell out more cash by way of more Centrally Sponsored Schemes in Andhra Pradesh.

The author tweets @sprasadindia

Updated Date: Aug 04, 2016 19:34 PM

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