Paper: GS – II, Subject: Polity, Topic: Federalism, Issue: Need for a Special Category Status for AP.
Context:
Since its bifurcation in 2014, Andhra Pradesh has faced severe financial distress, worsened by the loss of Hyderabad—a key revenue source—to Telangana. Despite assurances, the Andhra Pradesh Reorganisation Act, 2014, did not grant Special Category Status (SCS), though a special fiscal package was promised.
Key Highlights:
Historical Background:
Current Situation (as of 2024):
- Deteriorating fiscal condition: Mr. Naidu returns as CM amid high fiscal deficit, rising debt, and pressure to fulfil electoral promises and welfare schemes.
- Obligation of the centre: The Centre is not constitutionally obligated to bail out states, but has done so under discretionary grounds earlier.
Comparative Fiscal Data Post-Bifurcation:
It Indicates that AP is a notable outlier among newly formed states in terms of fiscal distress.
Past special fiscal package:
- Koraput-Balangir-Kalahandi (KBK) for Odisha.
- Bundelkhand for MP and UP.
- Bihar received a “pre-election” package in 2015.
These were based on political discretion, not strict eligibility criteria.
Arguments in Favor of special fiscal package for AP:
- AP’s fiscal crisis stems from structural losses, not misgovernance.
- Special Category Status denial has worsened its resource mobilisation capacity.
- Fairness demands equitable compensation like other newly formed states.
- This is essential for federal equity and upholding promises made in Parliament.
Andhra Pradesh Can Seek the following:
- Special financial package: A special fiscal assistance package, more generous than Special Category Status. It could include budgetary support, revenue deficit grants, Infrastructure assistance, and Compensation for loss of Hyderabad revenue.
- Finance commission push: A package recommended by the Finance Commission would carry greater legitimacy and reduce political backlash.
Conclusion:
A Finance Commission-led special fiscal package for AP is a constitutionally sound and economically justified solution. It can be tailored to AP’s needs and set a non-political, rule-based precedent.
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