As reported by Times of India

It is official now. Andhra Pradesh will not get special status. Instead, the Centre will give the residuary state a special incentive package with focus on industrial development. AP finance officials, who returned to Hyderabad on Friday after camping in Delhi for three days, told TOI that Union finance minister Arun Jaitley had cleared a special incentive package for AP in lieu of the special status promised by the previous UPA government.

The Union finance ministry, which is under intense pressure from chief minister N Chandrababu Naidu, held a series of meetings with AP officials, including chief secretary IYR Krishna Rao and principal secretary (finance) PV Ramesh, to work out a solution to the state’s financial issues. The Centre made it clear that special status for AP is not possible as a similar demand has been made by Odisha, Bihar, Uttar Pradesh, Goa, Karnataka, Madhya Pradesh and Tamil Nadu.“In this backdrop, AP has been persuaded to agree for a Centre-sponsored special incentive package,“ sources said. The package intends to accelerate industrialization in AP, particularly in the backward districts of Rayalaseema and north coastal Andhra.

It consists of three parts.

  1. First, the Centre will create a venture capital fund -AP Investment Promotion Fund -which will be announced in the Union budget. The Centre will pump in Rs 1,000 crore as seed capital and request big business groups to chip in.The money pooled will be used to fund new industries in the backward districts
  2. Secondly, the Centre will announce a financial package wherein the industries keen on setting up shop in AP will get three per cent rebate on interest, which the Centre will reimburse fully.
  3. Thirdly, the Centre has proposed a special incentive called `capital allowance‘ to allow discount in the income tax to be paid by the industries coming up in the state.

“The Centre will announce this package in a week or two. The finance minister has already signed on the file which proposes financial incentives to AP.We are happy that finally the Centre is coming to our rescue,“ said a senior official in the finance department.

Apart from the financial package, it was also decided to give relief to AP by increasing borrowing limits by amending the Fiscal Responsibility and Budget Management (FRBM) Act accordingly . That will allow AP to borrow more from both the domestic and international markets. “At present we are able to take loans up to 3 per cent of our GSDP. If this limit is increased, we will be able to raise more funds from the financial markets,“ finance principal secretary PV Ramesh told TOI.

Similarly, AP is to get special incentives from about six ministries such as agriculture and allied sectors so that intensive farming and mechanization of agriculture is encouraged.The warehousing, marketing, cooperation, fertilizers, banking and finance ministries are to clear these incentives separately .