N Chandrababu Naidu took charge as the Chief Minister of Andhra Pradesh on Thursday. As he stormed to victory and became an ally of the National Democratic Alliance, it takes one back to those days when he walked out of the NDA when his demand for a Special Category Status (SCS) for Andhra Pradesh was not granted by the PM Narendra Modi-led coalition.
It was 2018, when Naidu left the coalition, almost a year ahead of the 2019 general elections. And, this time, the situation appears like a double-edged sword for Naidu.
The two key allies of NDA 3.0 are Naidu and Bihar CM Nitish Kumar. If Naidu has the upper hand, then Kumar too has high stakes in the current central administration. Meanwhile, Nitish is also eyeing SCS for Bihar.
In retrospect, it is learnt that the demand for SCS by the Bharatiya Janata Party’s two key allies, Telugu Desam Party and Janata Dal (United) for Andhra Pradesh and Bihar, respectively, will be hard to meet. Several states may need a higher percentage of grants given their socio-economic and fiscal health.
One of the biggest benefits for states classified as a special category earlier was that 90 per cent of funds under centrally-sponsored schemes were contributed by the Centre, with the rest being contributed by the state itself.
The Central government may be apprehensive that opening such a window for Andhra Pradesh and Bihar may trigger similar demands by other states.
Many states are stressed for resources, among them is the BJP’s latest win, Odisha.
However, support for the two states held by the allies could be as special packages, which may include funds for building a capital city Amaravati in Andhra Pradesh or more Central projects for both the states.
Coming to Andhra Pradesh, there are many factors that suggest that the state does not qualify for the SCS.
The concept of SCS was first brought into existence through the recommendations made by the Fifth Finance Commission in 1969. It was done to benefit a few States through special grants from the Centre. The focus was on states that had socio-economic issues and geographical disadvantages, such as hilly States.
Five factors were qualifying benchmarks for the granting of SCS— States that comprise a majority tribal population; low density of population; hilly States and close to international borders; states that have socio-economic and industrial backwardness; and lack of adequate State finances.
At present, states that have the SCS include Arunachal Pradesh, Assam, Himachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Uttarakhand.
It was debated that Andhra Pradesh, based on the above strictures, does not qualify for the SCS and that the Finance Commission had already annulled it. However, the Centre offered Andhra Pradesh a special package (SP).
But NK Singh, the Chairman of the 15th Finance Commission, in his book ‘Portraits of Power’, said that the 14th Finance Commission never stated that SCS could not be given and that it was up to the Union Government to take a call.
The 14th Finance Commission instead of SCS had increased tax devolution to the State to 42 per cent and also introduced revenue deficit grants for States facing a revenue gap, which Andhra had already received.
SCS, which has an arrangement of funding states in a ratio of 90:10 (90 per cent the Centre and 10 per cent the State), may not be a ruled-out chapter for Andhra Pradesh. The Union Government can take a call and refer it to the 16th Finance Commission and the NITI Aayog and can get back to the arrangement.
Ever since the bifurcation of the state, Andhra Pradesh has been facing a revenue deficit. Additionally, the debts of the State have shot up enormously. Most of its projects and development have come to a standstill and on top of that the building for a new greenfield capital at Amaravati is pending and needs funding.
The state can hope that since the TDP is again part of the NDA alliance which does not have a clear majority in the Centre and is dependent on the MPs from Andhra Pradesh, it would be the right time to press for the SCS, for the overall development of the state.
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