Andhra special status row: Arun Jaitley talks tough, says 'politics can't increase quantum of money'

In a bid to pacify the sulking ally Telugu Desam Party (TDP), Finance Minister Arun Jaitley today promised Andhra Pradesh funds equivalent to what a special category state receives but drew a line saying politics cannot increase the quantum of money.

As the TDP threatened to quit the ruling NDA alliance led by the BJP at the Centre, Jaitley said his government was committed to meeting all promises made to Andhra Pradesh at the time of carving out of Telengana four years back. But giving special category status, as demanded by Andhra Pradesh Chief Minister Chandrababu Naidu, to any state apart from those in the North East and three hilly provinces is not constitutionally possible after the implementation of the 14th Finance Commission recommendation, he said.

However, to make up for that, the Centre would give Andhra Pradesh funds equivalent to what a special category status state gets, he said.

For special category status category states, the Centre meets 90 per cent of the funds required in a centrally sponsored scheme as against 60 per cent in case of normal category states. The remaining funds are provided by the state governments.

He said the Centre had committed 90 per cent of the funds for centrally sponsored schemes in Andhra Pradesh, equivalent to special category states, through other means like external agencies like World Bank, but the state government wanted funds to be routed through agri-lending bank NABARD. The Centre is agreeable to even that provided a mechanism is worked out, he told reporters at his office here.

Asked about the threat of TDP to pull out of the NDA if more funds are not allocated, he said "political issue cannot increase the quantum of money because the Centre has no free floating funds".

"Every state in India has the right to the central fund in the same manner. Sentiment does not decide quantum of funds, it is the constitutional award of the Finance Commission which decides on the quantum of funds that the states get," he said.

Asked about Congress President Rahul Gandhi's promise to give the state the special category status if his party is voted to power, Jaitley said, "I still have to follow constitutional award" of the 14th Finance Commission.

He said the Centre is committed to give funds to Andhra Pradesh equivalent to what a special status state gets, he said.

The 14th Finance Commission raised the share of states in taxes collected by the Centre to 42 per cent from 32 per cent but abolished special category states.

"The principal issue relates to what is the implication of a special status. The special status was originally granted to states in North East because they have their own resources which were inadequate and the revenue was inadequate," he said.

Jaitley said while the promise of special category status to Andhra Pradesh was legally possible when the state was bifurcated, there is no such category after constitutional award by the 14 Finance Commission.

"Instead states which are in deficit in terms of revenue, we are compensating them because everyone gets a hike of 10 per cent to 42 per cent plus for a certain period; revenue deficit will be taken care of and a provision for revenue deficit was made in the case of Andhra Pradesh," he said.

For Andhra Pradesh, the 90:10 funding of schemes instead of usual 60:40 would be implemented "notwithstanding the fact that the word special status is not there", he said.

During consultations in 2016, it was proposed that grants given by external agencies like World Bank, ADB and JICA to Andhra Pradesh would be repaid 90 per cent by the Centre and remaining 10 per cent by the state.

However, in January this year, the state government modified the request and demanded the money through NABARD.

"Now if NABARD gives directly to the central government, it gets added to the fiscal deficit. If it gives to the state government, it will get added to the state's fiscal deficit, and therefore reduces the borrowing capacity of the state," he said.

To overcome this, it was proposed last month that a special purpose vehicle be created in the state which deals with the development work. The NABARD fund will come into that corporation and the money wold be repaid to NABARD 90:10 ratio.

"We are awaiting a response, I hope it is a positive response, and the state tells us in what manner they want," he said. "At no stage has the Centre said that we won't give it."

Jaitley hoped for a positive outcome as he believed that the state needs assistance.

On revenue deficit, he said Rs 4,000 crore has already been paid for 2014-15 and only Rs 138 crore remains.

On the demand for tax incentives, he said in his Budget proposals he has already announced measures like investment and depreciation allowance.

"AP has suffered because of bifurcation and whatever support is required because of that (we will give)," he said, adding all issues have to be resolved within the framework of Centre and state relation.