The Joint Fact-Finding Committee (JFC), constituted by Jana Sena chief and film star Pawan Kalyan with retired IAS officers including Union Home Secretary Padmanabhaiah, former Chief Secretary IYR Krishna Rao and T Chandrasekhar, released its report in Hyderabad on Saturday.
Findings and recommendations
In spite of the then Prime Minister Manmohan Singh’s assurance on the floor of the Rajya Sabha on February 20, 2014, and the subsequent Cabinet decision to bestow Special Category Status (SCS) on Andhra Pradesh, the Centre went back on the promises on the ground that the concept of SCS has been abolished based on the recommendations of the 14th Finance Commission.
The second reason given by the Centre to deny SCS to AP is that NITI Aayog has decided to do away with this category. It is strange to argue that NITI Aayog, a non-statutory body, can overrule a Cabinet decision. The fact remains that 11 states even now enjoy SCS, despite the Centre’s claim that such a category is no longer relevant.
The North-Eastern States, along with Jammu and Kashmir, Himachal Pradesh and Uttarakhand continue as Special Category states and enjoy all benefits, like:
(a) Funding of Central-Sponsored Schemes on a 90:10 basis
(b) Funding of EAP scheme on a 90:10 basis
(c) 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
(d) Infrastructure support like growth centres scheme, integrated infrastructure development centres, integrated textile parks, mega food parks etc.
Andhra Pradesh will have a revenue deficit at least in the coming five years. It is the only state (other than the Special Category Status States) which is saddled with a revenue deficit every year from 2015 - 2020. Almost 95% of the assets of the erstwhile state of Andhra Pradesh have gone to Telangana, as they are located in Hyderabad. The committee, looking into the sharing of assets between the successor states, will take a long time to complete its work. Ninety per cent of the training institutions are in Telangana State, and Andhra Pradesh is required to pay service charges (to be decided by both the states) for using these institutions. This is a complex and long-winded process. The division of the erstwhile state has rendered Andhra Pradesh as a non-viable state.
Meanwhile, the Government of Andhra Pradesh agreed to the suggestion made by the Union finance minister on September 8, 2016, to accept a special package of assistance. A figure of Rs 16, 447 crore was mutually agreed upon between the Union Finance Minister and the State government in respect of Centrally-sponsored Schemes component alone. However, the subsequent experience of
Andhra Pradesh has been dismal, as not a pie has been released by the Government of India till now even to the extent of enhancing the Union Government’s share in Centrally-sponsored schemes.
SCS is the only answer
Under these circumstances, JFC has no alternative but to press for extending all benefits listed at a,b,c,d above to Andhra Pradesh, which are extended to special category status states. A mere grant of Rs 16,447 crore towards Centrally-sponsored Schemes is not a substitute to the Special Category Status.
Revenue deficit from June, 2014 to March 2015 (PM’s assurance on February 20, 2014)
Accountant General has worked out a figure of Rs 16,078.76 crore as revenue deficit for the year 2014-15.
This figure includes
A) Agriculture redemption Rs 3068.35 crore
B) Financial Assistance to Rythu Sadhikara Samstha Rs 4001.32 crore
C) Financial assistance to DISCOMS Rs 1500 crore
D) Old-age pensions Rs 3,391.20 crore
Total Rs 11960.87 crore
The Government of India disallowed the above four items on the ground that they are new schemes/substantially increased expenditure launched after bifurcation and arrived at a net deficit of Rs 4117.89 crore (16078.76 - 11960.87). Of this, it released Rs 3979.5 crore till now, and promised to release the remaining Rs 138.39 crore (Government of AP argues that there was no increase in the number of pensioners, and that the increase in amount was in accordance with the guidelines of the Centre. Similarly, assistance to DISCOMS also was within the Government of India guidelines).
The Government of AP also claimed that pay revision commission arrears to employees of Rs 5325 crore should also be treated as revenue deficit.JFC recommends that the financial assistance to DISCOMS, old-age pensions & PRC arrears are legitimate revenue expenditures and should be met by the Government of India.
Polavaram Project
Polavaram project, which is a national project, should be completed as scheduled.
All costs, including any escalations, related to land acquisition and resettlement and rehabilitation, should be borne by the Government of India.
Institutes of Natl Importance (Sch-13)
Of the 11 institutions, nine have been sanctioned by the Centre. Approximate cost to be borne by Centre for all the projects is estimated to be Rs 11,672.95 crore. The total funds released by the Centre till now are Rs 576 crore. An additional provision of Rs 277 crore is made in the budget for 2018-19.
JFC recommends to the Government of India to indicate the financing plan for the next five years.
Backward Areas Development (see Sec. 46(2), 46(3) & 94(2))
The Government of AP sent proposals to NITI Aayog in January, 2015 requesting a special development package for backward areas, for Rs 24,350 crore to be implemented over five years (This covers various sectors like agriculture, horticulture, minor irrigation, micro irrigation, rural water supply etc). The response from the Government of India is not known. But the Government of India released Rs 350 crore per year for the seven districts (at the rate of Rs 50 crore per district). An amount of Rs 1,050 crore was released for the three years, and they have agreed to release another Rs 1,050 crore in the coming years.
The Centre also announced a rebate of 15% higher depreciation, and 15% investment allowance on manufacturing units set up in the seven backward districts, between April 1, 2015 to March 31, 2020.
The then Prime Minister Manmohan Singh announced in the Parliament that a package on the lines of package for Bundelkhand could be considered for Andhra Pradesh.
JFC views this as a legitimate demand and should be sanctioned.
Rapid rail/road connectivity to Amaravati (Sch-13)
The state government has identified five road projects under this head.
i) Conversion of four-lane road to six-lanes on Hyderabad - Vijayawada (NH65) Highway and extend it to Amaravati (275 km)
ii) Four-laning of existing Hyderabad - Nagarjuna Sagar - Macherla (NH565) - Guntur - Amaravati. (Total length 290 km). The Government of India also to declare Macherla- Guntur - Amaravati Stretch as national highway.
iii) Four-laning (presently two-laning work in progress) of Amaravati - Ibrahimpatnam - Tiruvuru - Bhadrachalam (171 km), which further extends up to Jagdalpur (NH30).
iv) A greenfield Hyderabad to Amaravati express highway. Technical evaluation of bids for DPR for this project is under consideration by NHAI.
(v) Nitin Gadkari declared that Rs 72,000 crore is being spent on national highways in Andhra Pradesh. None of the proposals in his list falls under the provisions of the AP Reorganization Act 2014, except for the 180-km Outer Ring Road (ORR) of Amaravati which is estimated to cost Rs 20, 000 crore. A new railway line of 106.56 km between Vijayawada- Amaravati-Guntur has been announced by the Union Railway Minister on January 16, 2018.
The survey and DPR are estimated to cost Rs 3,272 crore. Only a token provision of Rs 10 crore in 2017-18 and Rs 10 crore in 2018-19 is made.
JFC supports this demand. Observing that the project cost would be known only after the DPR is prepared for the Vijayawada Metro Rail, the committee felt that views of the state government on Visakhapatnam Metro are not clear.
Vizag - Chennai corridor (Sch-13)
The Visakhapatnam - Chennai Industrial Corridor (VCIC)comprises four node-level Special Purpose Vehicles (SPVs). If equity is provided at the rate of Rs 3,000 crore to each SPV (according to approved pattern), GOI/NICDIT would have to spend Rs 12,000 crore. However, if only two nodes of Visakhapatnam and Chittoor which are prioritised to be take up immediately are considered, the contribution from GOI/NICDIT for these two SPVs would be Rs 6,000 crore. There is no response from the Government of India and the matter is pending there.
JFC requests the Government of India to take an early decision.
Steel plant in Kadapa district (Sch.13)
After the Steel Authority of India (SAIL) ‘s negative feasibility report in 2015, a joint task force was constituted to explore ways and means for improving the feasibility of the proposed steel plant. M/s. MECON is working on the revised feasibility of the plant. M/s. MECON has identified and visited two sites for the plant. Further modalities of investment etc. would only be available after the report is accepted by the Government of India.
JFC recommends that the Government of India should clear the revised feasibility report.
Dugarajapatnam Port (Sch-13)
After NITI Aayog informed that the project is not viable, the Government of AP is yet to take a stand in the matter. The Union Finance Minister has stated that an alternative site for port can be considered, if recommended.
JFC recommends that the Government of AP suggests an alternative site at the earliest.
K’nada Petrochem Complex (Sch-13)
Project to be taken in PPP mode & is estimated to cost Rs 32,900 crore. The Government of India was requested to meet the Viability gap of Rs 5,000 crore. There is no response from the Government of India.
Railway Zone for AP (Sch 13)
The matter is still pending with the Government of India, which should clear it soon.
Amaravati Capital City Project
Both the Government of AP and the Government of India are moving very slowly in this regard. Even though four years have elapsed, the Government of AP is yet to finalise the designs, estimates and Detailed Project Report (DPR) for the projects in Amaravati City. Works of the permanent buildings are yet to be started. Expenditure on the projects is poor so far.
The Government of AP should expedite these works and should submit detailed estimates to the Government of India which should provide the necessary funds.
The Government of AP is yet to provide information on Amaravati capital city project.
Anomalies on taxation matters
As per the AP Reorganization Act 2014, the tax arrears have to be collected at the place of assessment, whereas the liabilities have to be discharged on the basis of population (58:42).
This is resulting in loss to the Government of AP as most of the company headquarters are at Hyderabad & the losses are quantified at Rs 3820.36 crore.
Instead of amending the AP Reorganization Act 2014 at this time, JFC opines that the Government of India should compensate the Government of AP for the loss.
General Observations
1) For the whole project, specific funds received by the Government of AP, as per financial discipline, it should furnish the utilization certificates and get further funds.
2) Majority of the promises made to Telangana state have not been realised. The Government of India should announce a roadmap for this.
