Andhra CM Jagan Mohan Reddy knocks on NITI Aayog’s door for special status

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Andhra CM Jagan Mohan Reddy knocks on NITI Aayog’s door for special status

  • Recently, citing the state’s bifurcation in 2014, Chief Minister Y S Jagan Mohan Reddy has sought the NITI Aayog’s assistance in getting special status for Andhra Pradesh along with industrial concessions and tax exemptions – similar to the support offered by the Centre to Koraput and Balangir districts in Odisha and Bundelkhand in Madhya Pradesh.
  • As per the state officials this will sought the state’s help in securing Rs 6,284 crore in arrears owed by the Centre for the state’s power utilities as well as a resource gap amount of Rs 18,969 crore.
  • The state also sought support to streamline power generation stating that discoms are facing “severe loss”.

What is Special Category Status

  • Special Category Status used to be granted to some regions that have historically been at a disadvantage compared with the rest of the country.
  • This decision was taken by the National Development Council (NDC), a body of the former Planning Commission, and was based on various parameters such as:
  1. Hilly and difficult terrain
  2. Low population density
  3. Low resource base
  4. Strategic location along the borders of the country
  5. Economic and infrastructure backwardness
  6. Non-viable nature of the state’s finances.
  7. Sizable share of tribal population
  • Jammu & Kashmir was the first state to get Special Category Status, and another 10 states were added over the years, with Uttarakhand being the last in 2010.

What benefits does a state get under SCS

  • TDP wants special category status so that Andhra Pradesh will get special benefits and will be able to attract more investment, which will help it revive its economy following the loss of its capital Hyderabad to Telangana.
  • The benefits that a state gets under the provision of being a 'special state' are -
  • · Preferential treatment in getting central funds assistance
  • · Concession on excise duty to attract industries to the state
  • · A significant 30 per cent of the Centre’s gross budget goes to the special category states
  • · These states can avail the benefit of debt swapping and debt relief schemes
  • · In the case of centrally sponsored schemes and external aid, special category states get it in the ratio of 90 per cent grants and 10 per cent loans, while other states get 30 per cent of their funds as grants.
  • · Tax breaks to attract investment

Why does TDP want Andhra Pradesh to get Special Category Status

  • When Andhra Pradesh was bifurcated in 2014, it sought Special Category Status on the grounds that it was at a disadvantage, since it would lose a significant amount of revenue as a result of Hyderabad going to Telangana, the new state that came into existence on June 2, 2014.
  • Andhra Pradesh was promised Special Category Status by the Congress government, which was at the Centre during the state bifurcation, and by the BJP during the course of its 2014 election campaign, Manmohan Singh, who was then Prime Minister, said in the Rajya Sabha that special category status would be extended to Andhra Pradesh for five years to help put the state on a firmer footing.
  • This oral submission by the then PM has been the basis for Andhra Pradesh’s claim to the status. BJP, which was in the opposition, also stated that its would extend it to five more years if it formed the government. However, the 14th Finance Commission changed this.

Government's stance

  • The 14th Finance Commission did away with distinction between general and special category states since it had taken into account the level of backwardness of states in the proposed transfer of funds to states.
  • The idea was that adequate resources would be allocated through tax devolution and grants to address interstate inequalities.
  • The special category status was therefore restricted to the three hill states ( J&K, Himachal Pradesh and Uttarakhand) and those in the Northeast.
  • It was also decided that a revenue deficit grant would be provided for certain states for which devolution alone would be insufficient.
  • Andhra was one of the states that were to be given a revenue deficit grant.
  • The Centre would willing to honour the commitments made to Andhra Pradesh in 2014, but the granting of special category status itself was restricted by the 14th Finance Commission.
  • However, the government was committed to granting the monetary equivalent of a special category status to Andhra and would bear 90 per cent of the share of schemes sponsored by the Centre, with the state having to pitch in with only 10 per cent. Jaitley also said Rs 4,000 crore had been granted to Andhra to bridge its revenue deficit and only Rs 138 crore was left.