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Andhra Special Status Row: What Are the Demands and Why Are They Being Turned Down

With the Centre and state government sparring over the terms under which the bifurcation took place, a Joint Fact Finding Committee (JFC) was formed last month to clear the air. The panel said that the Centre should compensate the Andhra government for a revenue loss of Rs 74,542 crore that was caused due to the bifurcation.

Sakshi Khanna | CNN-News18

Updated:March 9, 2018, 5:31 PM IST
Andhra Special Status Row: What Are the Demands and Why Are They Being Turned Down
File photo of Prime Minister Narendra Modi with Chief Minister of Andhra Pradesh, N Chandrababu Naidu. (PTI Photo)
Hyderabad: After weeks of tense moments, TDP chief Chandrababu Naidu finally withdrew his ministers form the Narendra Modi government on Thursday, saying the Centre has failed to respect the sentiments of the people of Andhra Pradesh by not granting the Special Category Status.

With the Centre and state government sparring over the terms under which the bifurcation took place, a Joint Fact Finding Committee (JFC) was formed last month to clear the air. The 20-member team constituted Jana Sena President Pawan Kalyan, intellectuals, experts like Jayaprakash Narayan, K Padmanabhaiah, IYR Krishna Rao and others.

The committee, after extensive research, arrived at the conclusion that Andhra Pradesh deserved the Special Category Status, apart from what it has been promised in the AP Reorganization Act.

The panel recommended Special Railway Zone in Vizag, alternative port in Dugarajapatnam Port, Kadapa Steel Plant, special finance assistance to backward regions of Rayalaseema, Uttar Andhra and national-level institutions that were promised.

The JFC also said that the central government should compensate the Andhra government for a revenue loss of Rs 74,542 crore, caused due to the 2014 bifurcation.

Echoing Chandrababu Naidu's claim, the independent committee also questioned the fact that 11 other states are still enjoying the Special Category Status while the Centre has repeatedly said that such a category does not exist anymore.

Contrary to what Finance Minister Arun Jaitley said on Wednesday, the committee also concluded that there was no recommendation in the 14th Finance Commission report that the Special Category Status for states should be abolished — the ground on which the Centre has denied Andhra Pradesh the special category status.

According to JFFC’s report, “The Finance Commission had merely stated that: ‘We did not make a distinction between special and general category states in determining our norms and recommendations. In our assessment of state resources, we have taken into account the disabilities arising from constraints unique to each state to arrive at the expenditure requirements’, which was purely a procedural matter in arriving at the expenditure requirements of the states.”

The panel also expressed shock at the second reason cited by the Union government to deny Andhra Pradesh the Special Category Status. They said that the government thinktank NITI Aayog’s decision to do away with the category. They questioned how a non-statutory body can overrule a Cabinet decision.

Former Prime Minister Manmohan Singh had not only given assurance on the floor of the Rajya Sabha on February 20, 2014 that Andhra Pradesh would be given the Special Category Status, but a subsequent Cabinet decision was also taken to bestow the status on Andhra Pradesh.


The Andhra Pradesh government had agreed to the suggestion of a “special package” of assistance that was made by the Union Finance Minister on September 8, 2016. The two governments mutually agreed on a financial aid of Rs 16,447 crores, in respect of the centrally sponsored schemes component alone. This balance amount yet to be paid in this category is a matter that the state is yet to resolve with the government of India.

The Accountant General also worked out an amount of Rs 16,078.76 crore as revenue deficit for 2014-15, which included agricultural redemption of Rs 3,068 crore, financial assistance to Rythu Sadhikarika Samstha of Rs 4,000 crore, financial assistance to Discoms of Rs 1,500 crore and old age pensions of Rs 3,391 crore.

However, the Government of India disallowed the four categories on the grounds that they are new schemes and would substantially increase the expenditure. The Centre has arrived at a net deficit of Rs 4,117.89 crore (Rs 16,078.76 minus Rs 11,960.87) and of this, it has already released Rs 3,979.50 crore and promised to release the remaining Rs 138.39 crore.

The JFC, on the other hand, has recommended that the financial assistance to Discoms, old age pensions and PRC arrears are legitimate revenue expenditures and should be met by Union government.

According to its report, Andhra Pradesh is bound to suffer revenue deficit at least for another 5 years and it is the only state (other than the Special Category Status states), which is saddled with a revenue deficit every year from 2015 to 2020. Almost 95% of the assets of the united Andhra Pradesh have gone to Telangana after the bifurcation as they were located in Hyderabad, rendering Andhra Pradesh a non-viable state.

Of the 11 institutions that were promised, 9 have so far been sanctioned by the central government, while two other institutions, central universities at Anantapur and a tribal university at Vizianagaram, are yet to be sanctioned. The approximate cost to be borne by the Government of India for all of these projects is estimated at Rs 11,672.95 crore.

Total funds released by the Government of India till now is Rs 576 crore with an additional provision of Rs 277 crore made in the 2018-19 Budget.

In case of the Kakinada Petrochemical Complex — a PPP model project — the estimated cost is Rs 32,900 crore. While the state government had requested the Centre to meet the viability gap of Rs 5,000 crore, there has been no response from them.

Similarly, the matter of the Special Railway Zone for Andhra Pradesh is also pending with the Government of India.

Again, according to the AP Reorganization Act 2014, the tax arrears are to be collected at the place of assessment and liabilities have to be divided in a 58:42 ration with Telangana. This, too, has resulted in a loss to the Andhra Pradesh government, as most of the company headquarters in Hyderabad went to Telangana, where they pay the taxes. The losses are quantified at Rs 3,820.36 crores, which the Centre should compensate.


On the other hand, the benefits that the Special Category Status would bring to Andhra, include: Funding of Centre-sponsored schemes in a 90:10 basis; funding of EAP scheme on a 90:10 ratio; fiscal incentives like concession in excise duty up to 10 years; 100% income tax exemption for 10 years; 15-30% capital subsidy on plant and machinery; rebate on insurance premium on capital investment; interest subsidy on working capital loans and transport/freight subsidy; infrastructure support like growth centres scheme, integrated infrastructure development centres, integrated textile parks and mega food parks.
| Edited by: Sanchari Chatterjee
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