TDP’s Power Play In NDA Govt Formation Brings Andhra’s Demand For Special Category Status In Limelight Again

A “special status” essentially means that states with that label will get more financial assistance from the Centre–mainly for spending on their welfare schemes–over and above their allotted share.

Jun 6, 2024 - 11:30

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TDP’s Power Play In NDA Govt Formation Brings Andhra’s Demand For Special Category Status In Limelight Again

The recent alliance of Nara Chandrababu Naidu’s Telugu Desam Party (TDP) with the NDA at the Centre after the 2024 Lok Sabha Election results has reignited discussions around the long-standing Special Category Status (SCS) issue for Andhra Pradesh. Following a resounding victory in the Andhra Pradesh legislative assembly elections on June 4, the TDP, in coalition with the Jana Sena Party (JSP) and BJP, also secured a significant number of seats in the Lok Sabha polls. The triumphant TDP-JSP-BJP alliance managed to clinch victories in all three regions of the state—north coastal and south coastal Andhra, along with Rayalaseema. This alliance’s success has not only solidified its political standing but has also brought to the forefront the demands for SCS, a critical issue that holds immense importance for the development of Andhra Pradesh.

The SCS demand for Andhra Pradesh traces back to the state’s bitter bifurcation and Prime Minister Manmohan Singh’s 2014 assurance amid the passage of AP Reorganization Act, that the parent state would be compensated with a ‘special category status’ for five years. This was a crucial compensation for the state losing its revenue-rich capital Hyderabad.

A “special status” essentially means that states with that label will get more financial assistance from the Centre–mainly for spending on their welfare schemes–over and above their allotted share according to the Finance Commission’s recommendations. Special category status provides states with increased central assistance, grants, preferential allocations, and sometimes tax incentives.

Why does AP wants Special Category Status

When Andhra Pradesh was bifurcated to create Telangana, the UPA government promised SCS to compensate for the loss of revenue and development concentrated in Hyderabad. However, despite repeated appeals from former CM Naidu and current CM Jagan Mohan Reddy, the promise remained unfulfilled. Andhra Pradesh argues that the state was divided unfairly, with the successor state inheriting a disproportionate share of the population, debt, and liabilities but less revenue. For instance, Hyderabad accounted for the majority of software exports, leaving AP in a financially strained position.

Presently, Andhra Pradesh is primarily an agrarian state with significant revenue disabilities. This is evident from the fact that the per capita revenue of Telangana for 2015-16 was Rs 14,411, while it was only Rs 8,397 for AP, according to a report in The Indian Express.

The AP government asserts that the UPA had guaranteed SCS for a five-year period as a precondition to bifurcation. However, the promised compensation through development interventions and financial assistance has not materialized, leaving the state struggling to overcome its financial distress.

And what would SCS mean for AP?

Special Category Status holds the key to higher grants-in-aid from the Centre to state governments, providing crucial financial support. For instance, Special Category States receive a substantial per capita grant of Rs 5,573 crore annually, whereas Andhra Pradesh (AP) only gets Rs 3,428 crore, highlighting the disparity. SCS states benefit from unique industrial incentives like Income-tax exemptions, custom duty waivers, reduced excise duty, and corporate tax exemption for a specified period, the report in The Indian Express stated. They enjoy concessions and exemptions related to GST, along with lower state and central taxes.

Notably, in SCS states, the Centre funds central schemes up to 90%, a significantly higher percentage compared to non-SCS states, where the funding stands at 70%.

Which states have special category status?

Till date, as many as 11 states such as all the North East States including Assam, Meghalaya, Nagaland, Manipur, Himachal Pradesh and Telangana have been given the special category status.

The Special Category Status debate traces back to April 1969, following the approval of the Gadgil formula for fund allocation by the National Development Council. Initially granted to Assam, Jammu and Kashmir, and Nagaland, these states received 90% grant and 10% loan as Central Assistance. Subsequently, more states were conferred with this status upon achieving statehood. Himachal Pradesh was included in 1970-71, followed by Manipur, Meghalaya, and Tripura in 1971-72. Sikkim joined in 1975-76, and Arunachal Pradesh, Mizoram, and Uttarakhand followed suit in later years, with Uttarakhand being added in 2001-02.

SCS issue in 2024

Now, the issue of granting Special Category Status (SCS) to Andhra Pradesh, a promise dating back to the UPA-2 regime and the Andhra Pradesh Reorganisation Act of 2014, has resurfaced amid the 18th Lok Sabha Election results. The INDIA bloc, in its 2024 manifesto, had expressed intent to fulfill this promise in an effort to woo the TDP. The crucial question now looms over whether Andhra Pradesh will indeed be accorded the SCS, especially considering the TDP’s alignment with the BJP at the Centre.