M.Govinda Rao in the center

Ex member of 14th finance commission, reputed economist and Emeritus Professor, National Institute of Public Finance and Policy, M.Govinda Rao ( http://www.nipfp.org.in/staff/35/faculty/) has written in the Hindu on the special package accorded to Andhra Pradesh. Coming from a person as reputed as him who is known for his clear unbiased views, the article certainly deserved  a serious reading. At the very outset, he terms it as a good deal for Andhra Pradesh and goes on to say why he feels so. 

However he makes it abundantly clear that the 14th finance commission never objected to any Special status for AP for the simple reason that it was not within the terms of reference to make any recommendation in the first place. He terms as ‘misleading’ any attempts to say so. That makes it clear that when Arun Jaitley spoke in Parliament that 14th finance commission has objected to AP being granted special status, he was simply lying.

These are some excerpts from M.Govinda Rao’s Hindu article.

  1. On misleading statements of Arun Jaitley:  “The additional terms of reference merely stated that the commission should take into account the resources available to the successor or reorganised States in accordance with the Andhra Pradesh Reorganisation Act and the Ministry of Home Affairs notification. That did not require the commission to deal with the question of according special category status and it did not therefore make any recommendation in that regard. Therefore, the statement in the notification on special package that “… following the recommendations of the 14th Finance Commission, the class of special category States ceases to exist” is misleading.”
  2. On why speacial status does not mean anything anymore: “With the Fourteenth Finance Commission assessing the total requirements of the States without making a distinction between plan and non-plan, the grants given under the Gadgil-Mukherjee formula for State Plan Schemes got subsumed in the formula for tax devolution and grants. Therefore, the benefit of higher Central assistance due to special category status simply does not exist anymore’.
  3. On income tax and excise duty exemptions:  “Central government has already legislated the tax incentives in terms of additional investment allowance and accelerated depreciation applicable to AP. The assistance package announced by the Central government is generous by any account and certainly more than what the special category status could have brought in”.
  4. On other benefits AP got from the package:  “It has given Rs.3,979 crore as revenue gap grant, which is more than three times the amount recommended by the Fourteenth Finance Commission for 2016-17 (Rs.1,293 crore). Similar facility to cover revenue gaps in the future too has been promised. It has already given Rs.2,500 crore for building the new capital and has promised an additional Rs.1,000 crore. An amount of Rs.1,050 crore has been disbursed as a special package for backward areas. The Central government has agreed to meet the entire expenditure of the Polavaram project on the Godavari river which at 2011 prices was expected to cost Rs.16,010.45 crore”.

So what does Mr Govinda Rao finally say ?

“Never in the history of this country have bifurcated States received such a generous package even when they were extremely backward. Bihar and Madhya Pradesh lost the areas rich in minerals when they were divided. Chhattisgarh and Jharkhand had to start afresh without such a package. Surely, the Chief Minister of Andhra Pradesh has leveraged well his partnership in the National Democratic Alliance and friendship with the Bharatiya Janata Party”.

Here is a link to the Hindu article by Govinda Rao.