Memorandum submitted to Hon'ble President of India
Memorandum submitted to Hon'ble President of India

Memorandum submitted to Hon'ble President of India

Memorandum submitted to Hon'ble President of India

Tuesday, Feb 12, 2019

  1. The Hon’ble President of India is kindly aware that in terms of Andhra Pradesh Reorganisation Act, 2014, the then existing State of Andhra Pradesh was bifurcated into the State of Andhra Pradesh and the State of Telangana w.e.f. 02-06-2014.
  2. The unscientific division of the then State of Andhra Pradesh has not only caused severe hardships to the people of Andhra Pradesh but also inflicted serious blow to fiscal and economic strength of Andhra Pradesh besides affecting the development opportunities of the State.
  3. The inconsistencies in the Re-organisation Act and the actions of the Government of India causing injustice to the state of Andhra Pradesh are:
    1. The state received only 46% of the estimated revenues of the combined State while accounting for the 58% of its population which was also confirmed by the 14th Finance Commission.
    2. Assets were allocated on location basis whereas debt liabilities were distributed on population basis.
    3. In power sector, power consumption has been adopted as the basis of allocation which is detrimental to AP state.
    4. Refund of taxes is to be shared between Andhra Pradesh and Telangana on population basis (58.32 : 41.68) whereas deferred tax collections have been allocated on location basis. This has caused a loss of about Rs.3,800 Cr.
    5. No capital city for the residuary State of Andhra Pradesh
    6. Undivided loan liability of more than Rs.33,478 Cr. has been put originally in the books of accounts of Andhra Pradesh, burdening the State with discharge of liability along with interest, pending division. This has adversely impacted FRBM limits of Andhra Pradesh as well.
    7. Despite Singareni Collieries being an inter-state body after bifurcation and a Schedule IX Company, Telangana State has been allocated 51% equity of the company on location basis.
  4. The A.P. Reorganisation Act, 2014 contains 14 assurances in the main sections and 19 institutions and projects were mentioned in Schedule-XIII.
  5. The Hon’ble President is also aware that the then Hon’ble Prime Minister made six assurances on the floor of the Rajya Sabha on 20th February 2014, including Special Category Status for a period of 5 years to put the State’s finances on a firmer footing.
  6. Though the Government of Andhra Pradesh is in continuous touch with the respective Central Government Ministries, the progress of implementation of the assurances mentioned in the A.P. Reorganisation Act, 2014 as well as the assurances of the then Hon’ble Prime Minister on the floor of the Rajya Sabha is at snail’s pace and even after 4 ½ years not even one assurance given to the 5 crore people of Andhra Pradesh at the time of bifurcation of the State is fully implemented.
  7. The Hon’ble President is aware that the State was left without a capital on account of bifurcation. There is, therefore, urgent need to create infrastructure in the new capital and we seek your intervention in extending assistance liberally as provided under Section 94 (3) of the A.P. Reorganisation Act, 2014. The urgency is compounded by the fact that the State Government relocated the administration by shifting all the offices from Hyderabad to Vijayawada area to bring administration closer to people and officials & public are put to inconvenience on account of inadequate infrastructure. It is requested to make substantial allocations for Capital construction as a statutory duty is cast upon the GoI in this regard. Under a unique ‘Land Pooling Scheme’ devised by GoAP, farmers handed over 33,000 Acres of land valued at more than Rs.50,000 Cr. for the construction of greenfield capital city ‘Amaravati’. Provisional estimates indicate that it would require about Rs.1,09,023 Cr. to construct Greenfield Amaravati City including the Raj Bhavan, Secretariat, High Court, Legislative Assembly and Council along with trunk infrastructure and land development. Detailed Project Report for the Amaravati Government Complex and Infrastructure for a total of Rs.62,623 Cr. was submitted to GoI, for release of funds under Section 94(3) of APR Act. GoI has released Rs.1,500 Cr. during the years 2014-17 and no funds were released in 2017-18. The GoI has not yet released the additional amount of even Rs.1000 Cr. assured. GoAP submitted utilisation certificates for Rs.1632.48 Cr. GoI was requested to provide adequate funds for the development of Capital city of Amaravati as there is a statutory duty cast on it under section 94(3) of the APR Act.
  8. As per the assurance of the then Hon’ble Prime Minister on the floor of the Rajya Sabha on 20-02-2014, the resource gap that may arise in the successor State of Andhra Pradesh in 1st year, especially during the period between appointed day and the acceptance of the 14th Finance Commission recommendations by the Government of India, would be compensated in the regular union budget for the year 2014-15. Revenue deficit for the year 2014-15 was arrived at Rs. 16,078.76 crores by the Comptroller and Accountant General of India (CAG). But till date only Rs. 3,979.50 crores has been released in three instalments during 2014-15, 2015-16 and 2016-17. Government of India indicated that only Rs.138.39 crores more will be released disallowing the claim on the ground of “standardised expenditure” and new schemes expenditure. It is requested that Government of India release the entire balance amount of Rs.12099.26 (16078.76 – 3979.50) as certified by CAG.
  9. The Hon’ble Prime Minister of India has assured on the Floor of Rajya Sabha on 20th February 2014 that Special Category Status would be accorded to Andhra Pradesh for a period of five years to put the State finances on a firmer footing. After lot of persuasion from GoAP, citing constraints of 14th Finance Commission recommendations, the Union Finance Minister announced Special Assistance Measure (SAM) stating that all the ingredients of Special Category Status would be made available in the name of SAM. It was also informed that after introduction of GST, the assistance and incentives offered under Special Category Status would lapse and accordingly, the GoI announced Special Assistance Measure in the place of Special Category Status. The press release dt.08.09.2016 of the Ministry of Finance, Government of India has stated that the Central Government has agreed to give special assistance measure for GoAP for 5 years, which would make up for the additional central share the State might have received during these years i.e. 2015-16 to 2019-20 as envisaged in the then Prime Minister’s statement dt.20.02.2014 on the floor of Rajya Sabha. Whereas, the cabinet resolution dt.15.03.2017 limits it to CSS only. Thus, the union cabinet diluted its earlier statement dt.08.09.2016. For providing SAM, the EAP route was suggested by GoI initially. However, no operational guidelines were issued in this regard. When the State Government made a request to provide SAM through NABARD/HUDCO/BANKS, GoI suggested formation of Special Purpose Vehicle (SPV) and has put the burden on borrowing limit of the State. However, no written communication is received till date by the State Government. For providing Central Assistance to Special Category States, formation of SPV was never insisted in the past. Though the GoI has indicated that Special Category Status ceases the exist after 14th Finance Commission recommendations, the Union Cabinet in its resolution on 21.03.2018 approved North-East Industrial Development Scheme at a financial outlay of Rs.3,000 Cr. up to March, 2020. In the Office Memorandum Dt:17.08.2016 Niti Aayog has issued guidelines prescribing funding pattern to 8 North Eastern and 3 Himalayan States as 90:10 under core schemes where as for other States it is 60:40, thus continuing the benefit to Special Category Status under CSS schemes. Moreover the funding of 90:10 under Externally Aided Projects is also extended to Special Category States. In the recent past the GST Council provided special dispensation to Special Category States even under GST regime, in certain aspects. Thus, it has extended all the benefits that were available for Special Category Status States even after 14th Finance Commission recommendations, to North Eastern States. Dr. Y.V. Reddy, Chairman of 14th Finance Commission and Dr. M. Govinda Rao, Member of 14th Finance Commission specifically stated that Finance Commission has no role to play in recommending Special Category Status to any State. Further, the people of Andhra Pradesh unequivocally demand for the Special Category Status. In these circumstances, we request you to extend Special Category Status to Andhra Pradesh for a period of five years which would include 90% grant in CSS and EAP and industrial Incentives.
  10. The then Hon’ble Prime Minister assured on the floor of Rajya Sabha on 20.02.2014 for providing a special development package on the lines of K-B-K and Bundelkhand model to the backward areas of Andhra Pradesh. A proposal for Rs.24,350 Cr. implementable in 5 years, was submitted to GoI in October 2014, after consultations with the then Planning Commission. However, the Govt. of India has agreed to give only Rs.350 Cr. every year @ Rs.50 Cr. per each of the 7 districts, for six years. The GoI has so far released Rs.1050 Cr. for the years 2014-15, 2015-16 and 2016-17. For the year 2017-18, GoI had released Rs.350 Cr. on 09.02.2018 but took back the same unilaterally on 15.02.2018 without consulting the State Government. Further, No funds under Special Development Package have been released to Andhra Pradesh in 2017-18 and 2018-19 so far, in spite of specific request made by GoAP for release of Rs.700 Cr. for the years 2017-18 and 2018-19 and recommendation from NITI Aayog to Union Finance Ministry (vide OM No.O14015/18/2015-SP-S, dt.08.11.2018 and 18.12.2018) to release the same, to keep up the pace of works already grounded. We draw your attention to the fact that under Bundelkhand package, the per capita allocation was Rs.4,115/-whereas in respect of A.P., it is hardly Rs.428/. The GoI has released Rs.450 Cr. to Telangana Government under Special Development Package in September, 2018. Government of India was requested to immediately release Rs.700 Cr. for the years 2017-18 and 2018-19 to keep up the pace of works already grounded, as 25,007 works costing Rs.1641.50 Cr. are taken up, of which 14,512 are completed, 5,364 works are in progress and Utilisation Certificates for an amount of Rs.1049.34 Cr. are submitted to GoI. The State Government further demands for clearance of its original proposal for Rs.24,350 Cr. on the lines of Bundelkhand model.
  11. A proposal seeking special package of incentives, to promote industrialisation and economic growth was submitted to GoI under Section 94(1) of AP Reorganisation, Act 2014 on 26.06.2014 and till date no action is taken on this. GoI vide CBDT Notification issued in September 2016, notified seven districts for availing tax incentives - 15% of higher additional depreciation and 15% of investment allowance on the cost of plant and machinery acquired under section 32(1)(iia) and section 32AD of the Income-tax Act, in respect of any manufacturing undertaking set up during the period from 01.04.2015 to 31.03.2020. However, these incentives come under Section 94 (2) of the APR Act. These benefits given under Income tax Act have been extended for development of backward areas across various States like Telangana (9 Districts) West Bengal (11 Districts) and Bihar (17 Districts), that too before giving the benefit to 7 backward districts of Andhra Pradesh. Moreover, it is common knowledge that these incentives do not attract industrial investments and the orders issued by GoI are inconsequential. The GoAP requests the GoI to extend tax incentives namely (a) GST reimbursement upto the extent of Central share of CGST and IGST for five years, (b) reimbursement of Central share of Income Tax for first five years, (c) Central Capital Investment Incentive for Access to Credit (CCIIAC) - 30% of the investment in plant and machinery with an upper limit of Rs. 5 crores, (d) Central Interest Incentive (CII) - 3% rebate on the working capital credit advanced, (e) Central Comprehensive Insurance Incentive (CCII) - reimbursement of 100% insurance premium on insurance of building and Plant & Machinery for five years, and (f) transport and employment incentives, on par with Special Category States.
  12. According to Section 90 of A.P. Reorganisation Act, 2014 Polavaram Project is declared as National Project. Polavaram is the life line of AP People and as of now, 65.04 percent of the work has been completed and strenuous efforts are being made to complete the project by 2019. Total expenditure incurred on Polavaram project under National Project upto 11th February 2019 is Rs.10,748.26 Cr. Out of this, an amount of Rs.6727.26 Cr. has been released to GoAP by GoI. The balance amount of Rs.4021 Cr. is still to be reimbursed by the GoI. No funds are released since June 2018 by GoI towards reimbursement of funds already spent by the State Government resulting in strained State finances. As per the orders issued by the Ministry of Finance, GoI Vide F.No.1(2)/PF-1/2014(pt), Dt.30.09.2016, revised cost estimate of the Project at the price level as on 01.04.2014 has been submitted to Central Water Commission (CWC) on 16.08.2017. GoI is requested to approve revised cost estimates for Rs.57,940.86 Cr. expeditiously and ensure seamless reimbursement of money spent by the State Government to avoid interest burden.
  13. It is submitted with regret that the assurance relating to establishment of a new Railway Zone in the successor State of Andhra Pradesh remained unfulfilled so far. The Government of Andhra Pradesh has requested the Govt. of India for formation of a new Railway Zone with Visakhapatnam as headquarters. The Railway Board has constituted a Committee to examine the feasibility in this regard which has since submitted its report. This is a long pending decades old request and hence, there is an immediate need to fulfil this assurance by sanctioning a separate Railway Zone with Visakhapatnam as headquarters.
  14. We would like to bring to your kind notice that a new anomaly which did not exist in the earlier reorganisation legislations crept into Andhra Pradesh Reorganisation Act 2014, regarding matters dealing with taxation. Sections-50 & 51 deal with collection of arrears of taxes and recovery of loans and advances. For these two items place of assessment on the appointed day is prescribed as the basis in the Act. Hyderabad being the capital of the erstwhile State of Andhra Pradesh is the place of assessment for most of the taxpayers. As a result most of the arrears collected and loans recovered go to Telangana. When it comes to refund of taxes collected in excess Section-56 of the Act prescribes that the refund has to be shared by both the States on population basis. Government of Andhra Pradesh has requested Government of India to amend relevant provisions to rectify the anomaly and action in this regard is still pending. If the amendment is not made to the Act immediately, the state would be put to a loss of Rs. 3820 crores.
  15. Of the 11 Educational Institutions promised under Schedule XIII of the A.P. Reorganisation Act, 5 Institutions (IIT, NIT, IIM, IISER and IIITDM) are functioning from temporary campuses since 2015-16; 2 Institutions (IIPE and NIDM) are functioning from temporary campuses since 2016-17; 2 Institutions (Central University and AIIMS) are functioning from temporary campus from 2018-19 and one Institution i.e. Tribal University is not yet established. Further, as per the provisions of the APR Act, GoI should have established a Central Agricultural University but this is not done. Instead GoI has released Rs.135 Cr. to existing Acharya N.G. Ranga Agricultural University. GoAP has allotted 2909.17 acres of land and sanctioned Rs.131.33 Cr. for protection of land and land acquisition for the 11 Institutions. As against the Rs.12,825.98 Cr. required for setting up 11 Institutions GoI has released Rs.895.45 Cr. (6.98% of required funds), during 2014-19. At this rate of funding, it would take 20 to 30 years to establish the 11 educational institutions, in a full-fledged manner. We request GoI to ensure full-fledged establishment of these 11 institutions and appointment of regular faculty expeditiously and in a time bound manner.
  16. The Ministry of Shipping, GoI issued notification for setting up a Port at Duggirajupatnam vide Gazette Notification No.G.S.R.641(E), dt.16.09.2013. Further, there is very clear provision in the APR Act making it mandatory for GoI to develop a new major port at Duggirajupatnam with a target to complete phase-I by the end of 2018. Since this is a mandatory assurance in the Act, we request intervention of the Hon’ble President in ensuring that the assurance is implemented fully.
  17. A Cracker and Petrochemical Complex is proposed to be established by the GAIL-HPCL consortium at Kakinada as per Schedule XIII of the APR Act. The 1 MMTPA complex with feedstock of Ethane, Naphtha and Propane is estimated to cost Rs.32,900 Cr. The GAIL-HPCL consortium after discussions with GoAP, suggested a viability gap funding (VGF) of Rs.1,238 Cr. per annum for 15 years from zero date, to be provided by the State Government, repayable over the next 15 years. On net present value basis it amounts to onetime payment of Rs.5,615 Cr. and GoAP has requested GoI to provide the VGF since the Petrochemical complex was promised to Andhra Pradesh in the APR Act. It is pertinent to note that the above amount was quantified at 14% IRR whereas in some other projects done by public sector units and supported by Government of India, 9% IRR has been the norm. The estimated gross tax revenue to the GoI would be Rs.1,750 Cr. per annum, which includes CGST of Rs.350 Cr. and retained IGST of Rs.1,400 Cr. The estimated forex savings due to import substitution of the petrochemicals produced in this complex, would be to the tune of USD 1 Bn or Rs.6,500 Cr. GoAP agreed to subsidise power (Rs.577 Cr. per annum), water (Rs.51 Cr. per annum) and all external infrastructure support. However there was no positive response from GOI. An MOU has been entered by GoAP with M/s Haldia Petro Chemical Ltd (HPL) for setting up a crude to chemical manufacturing complex comprising refinery and naphtha cracker. The State Government decided to forgo its revenue by allowing 100% reimbursement of net SGST plus input tax credit including IGST paid against inputs and adjusted against SGST payable on goods produced and finally consumed in the State from the date of commencement of commercial production. The other incentives include 100% stamp duty and transfer duty reimbursement. Since there is an obligation to establish this unit on the part of GOI as per AP Reorganisation Act, it is requested that GOI may also extend incentives like CGST, IGST and Income Tax exemption.
  18. Even after providing all the information from time to time, the GoI has failed to establish the Integrated Steel Plant in Kadapa district during the last 4 ½ years. To ensure development of backward Rayalaseema region in general and Kadapa district in particular, the State Government ordered to establish the Integrated Steel Plant at its end and the foundation stone was laid on 27.12.2018. Since the GoI is obligated to establish the Steel Plant as per the provisions of APR Act, it is requested to provide tax incentives like exemption from GST, Income Tax exemption, exemption on Import Duty on capital goods and as well as raw material imports for a period of 10 years.
  19. In addition to the above, the division of assets, liabilities and employees of 89 corporations and companies in Schedule-IX and 142 institutions in Schedule-X to the Act is pending even after 4 ½ years after bifurcation.
  20. There are 89 Government Companies and Corporations mentioned in Schedule IX which are required to be bifurcated. The Expert Committee headed by Mrs. Sheela Bhide, IAS (Retired) has given recommendations for division of 88 (83 completely and 5 partially) out of the 89 institutions and the proposal of one institution namely A.P. State Financial Corporation is pending with Government of India. The Expert Committee had recommended division of assets, liabilities and employees of 83 out of the 88 institutions referred to above and in respect of the balance 5 institutions, the bifurcation of assets and liabilities has only been recommended. GoAP issued orders accepting the recommendations in respect of 40 institutions and in respect of 18 institutions certain deficiencies were pointed out and returned to the Expert Committee. The recommendations in respect of 30 institutions are under examination. The assets of the Schedule-IX institutions are tentatively valued at Rs. 1,58,508 Cr. However, no institution is so far bifurcated due to non-cooperation from the Government of Telangana and meanwhile the term of the Expert Committee expired on 31.01.2019. The GoI is requested to expedite the bifurcation of these institutions.
  21. Though the Andhra Pradesh State Financial Corporation is listed under schedule IX of Act, there are certain specific provisions under Section 70 of the act dealing with its bifurcation. In accordance with the provision under section 70 (3) of the Act, a scheme for division was submitted to Government of India on 29-01-2016 and approval is awaited.
  22. 142 State Level Institutions which are included in Schedule-X are not yet bifurcated. The Hon’ble Supreme Court of India in Civil Appeal Nol. 3019-3021 of 2016 has ordered for division of assets and liabilities on population basis. However, the GoI passed an order allocating movable and immovable assets on location basis. Since this is against the findings of Hon’ble Supreme Court of India, the GoI has been requested to withdraw its orders and pass fresh orders in tune with Hon’ble Supreme Court judgement and the matter is pending with GoI. The assets of the Schedule-X institutions are tentatively valued at Rs. 38,772.85 Cr.
  23. We submit that until and unless the Hon’ble President prevails upon the Ministry of Home Affairs, Govt. of India, the de-merger of companies and corporations mentioned in Schedule-IX and Schedule X of the Act would be further delayed.
  24. Though there is very clear provision in the Act regarding division of properties of A P Bhawan located at New Delhi and Ministry of Home has already clarified that these properties are divisible, the same is yet to take place. This needs to be expedited.
  25. Section-26 of the A.P. Reorganisation Act, 2014 provides for increase of existing seats from 175 to 225 in the A.P. Legislative Assembly. Proposals were furnished in this regard on 29.09.2016 and the matter is still pending with Govt. of India.
  26. The other assurances made in the Act regarding establishment of Vizag-Chennai Industrial Corridor, Rapid Road & Rail Connectivity from New Capital and Metro Rail Facility in Visakhapatnam and Vijayawada, Greyhounds Training Centre, River Management Boards etc. also need to be fulfilled. It is requested that a specific road map be prepared by each of the Departments concerned and action plan is drawn and implemented for the purpose of fulfilling all the assurances made to Andhra Pradesh without further loss of time. Further, the action plan drawn up needs to be monitored and reviewed at regular intervals at the highest level. Not even a single meeting was held at the highest level of Union Government with State Governments during the last 4 ½ years to review the progress of implementation of assurances and promises made to Andhra Pradesh at the time of bifurcation.
  27. In fact, the Andhra Pradesh Government has made a reference to the Ministry of Home Affairs under section 66 of the A.P. Reorganisation Act, 2014, to resolve the pending issues regarding bifurcation of assets and liabilities of the erstwhile State of Andhra Pradesh and action in this regard is awaited.
  28. We wish to bring to your kind notice that GoI has so far released an amount of Rs.14,259.32 Cr. to GoAP under various provisions of the A.P. Reorganisation Act, 2014 and Utilisation certificates have already been submitted for an amount of Rs.13,620.79 Cr.
  29. The Govt. of India is also not resolving the issue of power dues from Telangana Discoms. Owing to the obligations under A.P. Reorganisation Act, 2014, APGENCO has supplied power to the Telangana State and there is a duty on the part of Telangana Power Utilities to discharge the dues that have accrued on account of supply of this power. These dues accumulated to Rs. 5127.70 Crores excluding penal interest of Rs.604.70 Crores as on January, 2018. This has resulted in great financial burden to APGENO.
  30. Hon’ble President is the guardian of Constitution and has to protect not only the constitutional rights of the States but also of citizens of the Country. There is a constitutional duty cast on NDA Government to strictly adhere to the constitution provisions and respect constitutional functionaries. With great pain it is brought to the kind notice of the Hon’ble President that the present NDA Government has shown utter disrespect to constitutional functionaries as narrated below and an immediate need has arisen to direct the Government of India to adhere to constitutional provisions in letter and spirit.
    1. Parliament is the highest constitutional body in the country. The assurances made on the Floor of the Rajya Sabha by the then Prime Minister on 20.02.2014 are given a go by and not even a single assurance is implemented totally till now. The Special Category Status instead of implementation is denied We are fighting for special category status for the past 4 ½ years.
    2. The Hon’ble Supreme Court of India, yet another Constitutional Authority, has clearly ordered that all assets and liabilities of Schedule-X institutions are divisible on population ratio in APSCHE case. But the Union Home Ministry has passed a different order allocating assets on location basis. This shows utter disrespect to the Supreme Court by NDA Government.
    3. Another Constitutional functionary namely Comptroller and Auditor General has clearly certified the revenue deficit at Rs.16078.76 crore for the year 2014-15. This was not acted upon and the bureaucrats at the Finance Ministry in New Delhi arbitrarily cut the deficit without proper authority and justification.
    4. Other constitutional bodies namely A.P. Legislative Assembly and Legislative Council passed resolutions requesting for special category status and implementation of various provisions of the Andhra Pradesh Reorganisation Act, 2014 but the Govt. of India till now has not acted upon them.
The Hon’ble President is kindly aware that the bifurcation of erstwhile State of Andhra Pradesh was thrust on the people of the State by Govt. of India even though the State Legislature has unequivocally rejected the proposal for bifurcation. On account of different criteria and standards adopted in various provisions of the Act, the economy and development programmes of residuary State of Andhra Pradesh are badly affected. If the above assurances and promises are fulfilled in a specific span of time, there will be scope for the residuary State of Andhra Pradesh to recover from the huge losses it suffered due to the bifurcation to some extent and leap forward. Since the division is forced on the State, there is a duty on the part of the Government of India to regularly review all the above issues for expeditious resolution. In the circumstances, the above issues are brought to the kind notice of the Hon’ble President for his intervention and resolution of the pending issues for which act of the Hon’ble President, we are all grateful.

Date: 12.02.2019

Place: New Delhi
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