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AP state division promises: Reality and Perception

In this article, I will deal with making good the revenue deficit gap as envisaged in Section 46 of the Act and the statement of Prime Minister on the floor of Parliament. 

Published: 28th November 2018 09:16 AM  |   Last Updated: 28th November 2018 09:16 AM   |  A+A-

Former chief secretary IYR Krishna Rao

It is more than four years since Andhra Pradesh was reorganised leading to the creation of the State of Telangana and leaving the balance region as the residuary State of Andhra Pradesh. The bifurcation was against the popular sentiment in the Andhra region and to placate the public opinion there, a number of promises were incorporated in the Reorganisation Act and also announced as part of the statement of the then Prime Minister Manmohan Singh on the floor of Parliament. 

It may be worthwhile to take a look at what is promised and what is implemented and the balance that needs to be fulfilled by the Government of India in this regard. In this article, I will deal with making good the revenue deficit gap as envisaged in Section 46 of the Act and the statement of Prime Minister on the floor of Parliament. 

It is Section 46 of the Act, which provides for the Central government to make a reference to the 14th Finance Commission to make an award to both the new States. Accordingly, the reference was made to the 14th Finance Commission and having examined the impact of the division, they determined Telangana to be a revenue surplus State and did not recommend any revenue deficit grants, but made a recommendation of `21,113 crore for a five-year period between 2015-2020 to Andhra Pradesh. 

In fact, other than the North Eastern states, Andhra Pradesh was the only State to get revenue deficit grants for all the five years of the 14th Finance Commission award. This was a generous dispensation given to put the finances of the State on a sound footing, provided the government was prudent and careful with reference to its expenditure.

That still left a revenue gap for the year 2014-15 since the 14th Finance Commission award is from 2015 to 2020. Though this also finds a mention in Section 46, it was further elaborated in the statements of the then Prime Minister on the floor of the Parliament. 

The former Prime Minister said the resource gap that may arise in the successor State of Andhra Pradesh in the very first year, especially during the period between the appointed date and the award of the Finance Commission, would be compensated in the Union Budget for 2014-15. 

Even before the division of the State, the Governor of Andhra Pradesh made an assessment that this deficit is likely to be around `16,000 crore. 

But contrary to the estimates made by the Governor, revenues were buoyant and expenditure was under control and by December 2014, it was evident that deficit may not cross `3,000 to `4,000 crore. It was only from January that the State government started booking expenditure on different electoral promises and was able to boost up the revenue deficit to `16,078 crore with a confidence not based on reality that they would be able to realise it from the Government of India.

When, accordingly, proposals were sent to the Government of India, they scrutinised them and were willing to make good normal deficit consequent to bifurcation of the State, but not incurred on fulfilment of electoral promises since that can lead to such demands from other States as well. The normal deficit after excluding expenditure incurred on the electoral promises was assessed at `4,117 crore. They also put forward an alternative stating that since the 14th Finance Commission for 2015-16 normatively assessed deficit of the State at `6,609 crore, they were willing to consider that as the base and release proportionately for the 10 months from June 2014 till the end of the financial year.

The State government was unrelenting in its demand to make good the total `16,078 crore, which the Government of India was not willing to accept. Finally, when one Sudhakar Reddy filed a case in the Supreme Court regarding implementation of the promises made at the time of the division of the State, the Government of India has gone on record stating that under this head what is due to the State government is only `4,117 crore. 

As could be seen, the State government tried to make the Government of India pay for its electoral promises, but without success. This, in fact, is the difference between the perception and reality with reference to making good the revenue deficit gap for Andhra Pradesh post division. 
There are other sections dealing with promises about establishment of educational institutions, infrastructure projects and grant for the backward areas, which I’ll be dealing with in another article.

(The author is former Chief Secretary and member of the BJP)

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