New Delhi: Whether or not the N. Chandrababu Naidu-led Telugu Desam Party (TDP) finally snaps ties with the Bharatiya Janata Party (BJP) and pulls out of the National Democratic Alliance (NDA) will be clear in the next few days. But as of now, Naidu’s decision to pull out of the Narendra Modi government, which he announced in a late evening press conference on March 7, has precipitated yet another crisis in governance and, more importantly, Centre-state relations.
Speculations that the TDP would leave the NDA had been rife since the morning of March 7, after a late night meeting of 125 TDP MLAs and 34 MLCs who reportedly unanimously advocated for the alliance to end. And then, when the Union finance minister Arun Jaitley addressed a press conference in Delhi the same evening on Andhra Pradesh’s demand for special category status, it was almost clear that something of this sort was going to happen.
Hours later, Naidu declared that due to the “unwillingness of the Centre” to understand Andhra Pradesh’s financial condition, two Central TDP ministers – Ashok Gajapathi Raju, cabinet minister for civil aviation, and Y.S. Chowdary, minister of state for science and technology and minister of state for earth sciences – will resign from Modi’s cabinet on Thursday morning.
According to government sources who requested anonymity, Modi’s reticence in giving in to the TDP’s demands precipitated this crisis.
In a meeting between Naidu and Modi on January 12, 2018, the former, who had been negotiating hard with senior government officials, handed over a detailed document to the prime minister and sought his direct intervention. The document, which The Wire has accessed, lists multi-layered problems of Andhra Pradesh and explains how it was financially pushed to the wall after the state’s bifurcation in 2014. The then Congress-led United Progressive Alliance (UPA) government had promised to grant special category status to the state, but the Modi government has not moved on that front over the last four years.
Almost two months passed by but the TDP claims that the Modi government did not fulfil any of its demands, despite having got multiple interim assurances from Jaitley, home minister Rajnath Singh and BJP president Amit Shah.
Jaitley said at Wednesday’s press conference that the 14th Finance Commission has discontinued the practice of granting special category status to states, except those in the Northeast and four hilly states – Uttarakhand, Himachal Pradesh, Sikkim and Jammu and Kashmir – which have already been accorded special category status. He insisted that as part of the Union government, his job is also to meet the demands of other states and allocate funds from the Central pool accordingly. “Why not Bihar, why not Jharkhand?” he asked a reporter who questioned him on granting special category status to Andhra.
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Jaitley added that since a special category state is supposed to receive 90% of the funds from the Centre for the implementation of centrally-sponsored schemes (as against 60% in other states), the Union government was willing to give that “30% advantage” to Andhra Pradesh in whichever way the state wanted – but without the special category tag. Regarding the demand for tax incentives to the state, the finance minister said that those have already been announced in his first three budgets. As far as the fulfilment of AP’s revenue deficit is concerned, Jaitley said that most of it has been paid over the last four years and he has agreed to disburse the remaining Rs 1,600 crore soon.
He added that approximately Rs 2,500 crore and Rs 5,000 crore have already been paid to the state for two contentious issues – development of the new capital and rehabilitation and resettlement around the Polavaram dam respectively – and hopes that the funds are being properly utilised by the state government.
So wherein lies the problem? The document titled ‘Detailed Note on Issues Related to AP Reorganization Act, 2014’, which Naidu handed over to the prime minister, has some answers.
Andhra Pradesh’s demands
It is clear from the state government’s report that Andhra Pradesh’s problems aren’t only about being granted special category status.
The crux of the problem is that following the bifurcation, Andhra Pradesh lost a substantial section of its revenue due to Hyderabad remaining with Telangana. The state government feels that the service sector has taken a bad hit following the bifurcation because of insufficient urbanisation. Moreover, it feels that it had to part with most of its resources and infrastructure, and should be given special category status as the UPA government had promised for a period of five years, as well as additional tax incentives. In other words, it hopes to have the Centre’s sustained support to develop physical and social infrastructure.
Further, the Andhra Pradesh government is of the opinion that these problems were exacerbated by the “irrational” allocations made to the state during the reorganisation and expects the Centre to correct the anomalies.
The report says that one of the anomalies, which was also confirmed by the finance commission, was that it was allocated only 46% of the estimated revenue despite the fact that 58% of the erstwhile state’s population settled in the reorganised Andhra Pradesh.
“In respect of Gross Domestic Product at current prices with 2011-12 base year, against Rs.9,15,852 crores, the share of Andhra Pradesh came to only Rs.4,64,272 crores (50.69%) for a population of 58%. Due to the irrational and unscientific division, the per capita income of the State was also badly affected. In the year 2013-14 with 2011-12 as base at current prices, the per capita income of Telangana came to Rs.1,12,162 whereas it was merely Rs.82,870 for Andhra Pradesh…During this period though Andhra Pradesh has improved the per capita income from Rs.82,870 to Rs.1,22,376/-, but it continues to be the State with lowest per capita income in southern states.”
It claims that because of this, the state’s revenue deficit shot up immensely. This, in turn, limited its borrowing potential, as per the Fiscal Responsibility and Budget Management (FRBM) Act’s restrictions. One of its demands is also that the Centre steps in and repays all its previous loans and increases its borrowing potential.
“The 14th Finance Commission has further estimated that pre-devolution revenue deficit of Andhra Pradesh will increase from Rs.31,646 crores (2015-16) to Rs.47,240 crores (2019-20). The post- devolution scenario revenue deficit of Andhra Pradesh will be Rs.22,112 crores (2015-16 to 2019-20). In comparison pre-devolution revenue surplus of Telangana will increase from Rs 818 crores (2015-16) to Rs 8,902 crores (2019-20). In the post devolution revenue surplus of Telangana will be Rs.1,18,678 crores during the period from 2015-16 to 2019-20.”
In this regard, the report notes, “It is also requested that the State of Andhra Pradesh be allowed a Fiscal Deficit limit of 3.5 per cent of GSDP as against current 3 per cent and accord permission to the State to amend the FRBM Act.”
Similarly, the Andhra Pradesh government says that power allocation to the two states – Andhra Pradesh and Telangana – was also done on a consumption basis. With the highly power-consuming Hyderabad going to Telangana, Andhra Pradesh’s share of power was extremely low and insufficient to develop its infrastructure.
The report also says, “A huge debt liability of Rs 1,30,000 crores was transferred to Andhra Pradesh account. In fact, the undivided loan liability of more than Rs 33,000 crores has been put in the books of accounts of Andhra Pradesh, burdening the State with discharge of liability pending division.”
Similarly, bifurcation has increased its pension liabilities, which were divided according to population ratio, the report notes.
It also points out the ongoing tussle between Telangana and Andhra Pradesh over control of companies like Singaneri Collieries and APHMEL and seeks Central intervention.
It was pointed out by the state government that various anomalies have crept in during the bifurcation, and despite the Modi government promising to resolve the issues, not much has been done. For instance, it notes that various infrastructural projects like the metro rail, construction of a railway zone, a port, a steel plant and so on were promised by the Modi government, but it has not disbursed the required amount to build any of these.
To top this, even the promised assistance to meet the revenue deficit, guaranteed to the state for a period of five years during bifurcation, was not disbursed in full, let alone any additional amount, the government has said.
For instance, the report notes, “Revenue deficit for the year 2014-15 was arrived at Rs. 16,078.76 crores by Accountant General. But, till date only Rs. 3,979.50 crores has been released.” The report also points out multiple “taxation anomalies” when the state was divided as a result of bifurcation, and if not rectified, will burden the AP government with a loss of Rs 3,820 crore.
It also says that Section 26 of the AP Reorganisation Act, 2014 provides for increasing the existing legislative assembly seats from 175 to 225, but the Centre has done nothing on that front. The TDP government says that these demands are its right and will ensure a level playing field for the struggling state.
Ever since the TDP has upped its ante against the BJP, a political cat-and-mouse game is on. It was the BJP which beat the TDP first in this contest on March 7, using Jaitley – the finance minister who did not appear in front of the press when the Modi government found itself in the dock on the Punjab National Bank fraud case recently – for damage control. The finance minister talked about it like a political issue, saying that it would be an injustice to states like Bihar and Jharkhand if the Centre grants special status to Andhra Pradesh. On the other hand, he also said that he was “agreeable” to most of Andhra Pradesh’s demands and is ready to meet the state’s monetary needs. His suggestion seemed to be that the state government was merely being obstinate.
It could be that the finance minister was trying to pitch north India, where the BJP dominates, against the south ahead of 2019 general elections.
While Naidu missed the bus initially by not taking the decision to part with the Union government before Jaitley set the national narrative, he made amends with an emotional address at the press conference, conducted just before midnight. He was laying the ground for a regional narrative and consolidating his own place in the state. He projected himself as a victim of the Centre’s injustice. He said that despite having more than two decades of political experience, he sacrificed his pride to visit New Delhi 29 times to work out a plan for Andhra Pradesh’s development, but to no avail.
His political messaging was directed towards the Telugu-speaking people. The YSR Congress has been raising its voice against the TDP, campaigning that the so-called “soft attitude” of Naidu was the reason that the Centre has not paid heed to Andhra Pradesh’s demand for a special status.
Naidu not only addressed that allegation but also nullified YSR Congress’s strategy to beat him in the upcoming elections. At the same time, he sealed the BJP’s fate in the state. For the national party to initiate new talks with Naidu’s opposition, it will now require a Herculean effort.
Meanwhile, Congress president Rahul Gandhi also put his party in the ring by promising special category status to AP if it comes to power in 2019. After the bifurcation of the state, the Congress had lost most of its ground in the reorganised AP.
Despite the political play, TDP pulling out of the Central government is a clear setback to the BJP. While Maharashtra-based parties Shiv Sena (which has announced its plans to go solo in the 2019 general elections) and Raju Shetty-led Swabhimani Shetkari Sanghtana are already out of the NDA, the exit of the TDP may come as a severe jolt to the BJP’s electoral plans in 2019, in terms of both optics and groundwork.