Joint Fact Finding Committee (JFC) :: Recommendations 1.Giving Special Category Status to Andhra Pradesh Inspite of the then Prime minister Dr.Manmohan Singh s assurance on the floor of the Rajya Sabha 0n 20 th Feb 2014, and the subsequent cabinet decision, to bestow status of a Special Category state on Andhra Pradesh; Government of India went back on the promises, on the ground that the concept of Special Category status has been abolished based on the recommendations of the 14 th Finance Commission. But the fact is that there is no recommendation in the Finance Commission report that Special Category Status for states should be abolished. The Finance Commission merely stated: We did not make a distinction between special and general category states in determining our norms and recommendations In our assessment of state resources, we have taken into account the disabilities arising from constraints unique to each state to arrive at the expenditure requirements. This is purely a procedural matter in arriving at expenditure requirements of the states. There is no recommendation that the classification of Special Category Status should be abolished. A second ground given by the Government of India to deny Special Category Status to Andhra Pradesh 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 Special Category Status, despite Government of India s claim that such a category is no longer relevant. The North Eastern States, along with J&K, Himachal Pradesh, and Uttarakhand continue as Special Category states and enjoy all benefits, like: (a) Funding of Central Sponsored Schemes in 90:10 basis (b) Funding of EAP scheme on a 90:10 basis 1
(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 is going to have a revenue deficit at least for the coming 5 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 erstwhile State of Andhra Pradesh have gone to Telangana, as they are located in Hyderabad. The committee looking into the sharing of the assets between the successor states is going to take a long time to complete its work. 90% of the training institutions are in Telangana State, and Andhra Pradesh is required to pay service charges (to be decided by both the states) to use 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. As such there is every justification to honor the solemn assurance made earlier to treat Andhra Pradesh as a Special category status state. Meanwhile Government of Andhra Pradesh agreed to the suggestion made by the union finance minister on 8 th September 2016, to accept a special package of assistance. A figure of Rs.16447 crores was mutually agreed upon between the union finance minister and Government of Andhra Pradesh 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 government of India till now even to the extent of enhancing Union Government s share in Centrally sponsored schemes. 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.16447 crores towards centrally sponsored schemes is not a substitute to Special Category Status. 2
2. Revenue deficit from June 2014 to March 2015 (PM s assurance on 20 th Feb 2014) Accountant General has worked out a figure of Rs.16078.76 crores as Revenue deficit for the year 2014-15. This figure includes, A) Agriculture redemption 3068.35 crores B) Financial Assistance to Rythu Sadhikarika Samstha 4001.32 crores C) Financial assistance to DISCOMS 1500.00 crores D) Old age pensions 3391.20 crores Total 11960.87 crores Government of India disallowed the above 4 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 crores (16078.76 11960.87). Of this, it released Rs.3979.50 crores till now, and promised to release the remaining Rs.138.39 crores (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 Government of India guidelines). Government of AP also claimed that pay revision commission arrears to employees of Rs.5325 crores should also be treated as Revenue deficit. But Government of India refused to consider it, as the expenditure was incurred prior to the period June 2014 (Some newspapers reported that there was an increase of 43% of the basic pay. The fact is, that PRC recommended a fitment of 29% of the basic pay. But both Telangana & AP governments deemed it necessary to increase the basic pay by 43%. Government of AP s argument is that it is the prerogative of the State government to fix a higher fitment benefit, considering all facts). 3
JFC recommends that the financial assistance to DISCOMS, Old age pensions & PRC arrears are legitimate revenue expenditures and should be met by Government of India. 3. Polavaram project i) Polavaram project, which is a national project should be completed as scheduled. II) All costs, including any escalations, related to land acquisition, Resettlement & Rehabilitation should be borne by Government of India. III) Government of India / Polavaram Project Authority (PPA) should take steps to ensure smooth flow of funds for seamless and uninterrupted project work. 4. Institutes of National Importance (Sch-13) Of the 11 institutions, 9 have been sanctioned by Government of India, and the other two institutions namely Central university at Anantapur and Tribal university at Vizianagaram are yet to be sanctioned. The approximate project cost to be borne by Government of India for all the projects is estimated to be Rs.11672.95 crores. The total funds released by Government of India till now are Rs.576 crores. An additional provision of Rs.277 crores is made in the budget for 2018-19. In all 9 institutions, classes have commenced in temporary campuses or construction is in progress. JFC recommends Government of India to indicate the financing plan for next 5 years. 5.Backward Areas Development (see Sec. 46(2), 46(3) & 94(2)) Government of AP sent proposals to NITI Aayog in Jan 2015 requesting a special development package for Backward areas, for Rs.24350 crores to be implemented over 5 years (This covers various sectors like agriculture, horticulture, minor irrigation, micro irrigation, rural water supply etc). The response from Government of India is not known. But Government of India released Rs.350 crores per year for the 7 districts (at the rate of Rs.50 cr per district). An amount 4
of Rs.1050 crores was released for the 3 years, and they have agreed to release another Rs.1050 crores in the coming years. Government of India also announced a rebate of 15% higher depreciation, and 15% investment allowance on manufacturing units set up in the 7 backward districts, between 1 st April 2015 to 31 st March 2020. The then Prime Minister Dr.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. 6. Rapid rail/road connectivity to Amaravati (Sch-13) The Government of AP 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 kms) ii) Four laning of existing Hyderabad Nagarjuna Sagar Macherla (NH565) - Guntur Amaravati. (Total length 290 kms). Government of India also to declare Macherla Guntur Amaravati Stretch as national highway. iii) Four laning (presently 2 laning work in progress) of Amaravati Ibrahimpatnam Thiruvuru Bhadrachalam (171 km), which further goes to Jagdalpur (NH30). iv) A green field road Hyderabad to Amaravati express highway. Technical evaluation of bids for DPR this project is under consideration by NHAI. (v) Shri Nitin Gadkari declared that Rs.72000 crores is being spent on national highways in Andhra Pradesh. None of the proposals in his list fall under the criteria of AP Reorganization Act 2014, except the Outer Ring Road(ORR) of Amaravati estimated to cost Rs.20000 crores for a length of 180 km. The DPR for this ORR is under preparation by NHAI and is likely to be available by 18-05-2018. 5
A new railway line of 106.56 km between Vijayawada- Amravati-Guntur has been announced by Union Railways Minister on 16-01-2018. The survey and DPR is estimated to cost Rs.3272 crores. Only a token provision of Rs.10 crores in 2017-18 and Rs.10 crores in 2018-19 is made. JFC supports this demand. 7. Vijayawada metro rail (Sch.13) Government of India has returned the DPR of Vijayawada on 01-09-2017 requesting to examine the same under the new metro policy announced in August 2017 and to resubmit the same to Government of India. Government of AP has assigned the work of preparation of DPR for light metro (instead of metro) and the project cost etc. would be known only after DPR is made. 8.Vishakhapatnam metro rail (Sch.13) This proposal also has been returned by Government of India on 01-09-2017 for re-examination under the new metro policy. The Government of AP s views on Vishakhapatnam metro are not clear. 9. Vishakhapatnam Chennai industrial corridor (Sch-13) Government of Andhra Pradesh under APICDA Act took up this project with Asian Bank funding. The Government of AP has approached Government of India for inclusion of this corridor within the purview of National Industrial Corridor Development and Implementation trust (NICDIT). If it is so included, 49% of the equity will come from the trust fund and the balance 51% would be contributed by the Government of AP in lieu of valuation of land to be vested in the SPV. The Vishakhapatnam Chennai industrial corridor comprises of 4 node level SPVs. If equity is provided at the rate of Rs.3000 crores to each SPV (according to approved pattern), GOI/NICDIT would have to spend Rs.12000 crores. However, if only 2 nodes of Vishakhapatnam and Chittoor which are prioritized to be take up immediately are considered, the contribution from GOI/NICDIT for these two 6
SPVs would be Rs.6000 crores. 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. 10. Steel plant in Kadapa district (Sch.13) After 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 which is said to have submitted the report to the Union steel ministry. Government of AP is expecting a copy of the same. M/s. MECON has identified and visited two sites for the plant. The further modalities of investment etc. would only be available after the reported is accepted by Government of India. JFC recommends that Government of India should clear the revised feasibility report. 11. Dugarajapatnam Port (Sch-13) After NITI Aayog informed that the project is not viable, Government of AP is yet to take a stand in the matter. Union Finance Minister has stated that a alternate site for Port can be considered, if recommended. JFC recommends that the Government of AP suggest an alternate site at the earliest. 12. Kakinada Petrochemical Complex (Sch-13) Project to be taken in PPP mode & is estimated to cost Rs.32900 crores. Government of India was requested to meet the Viability gap of Rs. 5000 crores. There is no response from the Government of India. 7
13. A Railway Zone for Andhra Pradesh (Sch 13) The matter is still pending with the Government of India, which should clear it soon. 14. Amaravati Capital City Project: Both Government of AP and Government of India are moving very slowly in this regard. Even though 4 years period has elapsed, the Government of AP is yet to finalize 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. Government of AP should expedite these works and should submit detailed estimates to Government of India and Government of India should provide the necessary funds. Government of AP is yet to provide information on Amaravati capital city project. 15. 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 Government of AP as most of the company headquarters are at Hyderabad & the losses are quantified at 3820.36 crores. 8
S No 1 Item Special Package (8th Sep 2016) - Centrally sponsored scheme component Rupees (in crores) Paid/ Promised to pay 16447 Nil 16447 2 Revenue deficit 14333 4118 10225 3 Backward Areas 24350 2110 22250 Balance yet to be resolved with GOI 4 Reimbursement to AP to overcome loss on account of anomalies of 3820 3820 taxation 5 Visakha-Chennai corridor 6000 Nil 6000 6 Kakinada petro complex 5000 (viability gap) Nil 5000 7 Polavaram Project 8 Institutes of national importance 11673 576+277=853 10800 Total 74542 Instead of amending the AP Reorganization Act 2014 at this time, JFC opines that Government of India should compensate the Government of AP for the loss. General Observations: 1) For whole of the project specific funds received by 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 realized. Government of India should announce a road map for this. 9