Union budget gets mixed response in AP, Telangana

Telangana Chief Minister K.Chandrasekhar Rao has expressed his dissatisfaction over the 2014-15 union budget.

Criticising the budget presented in the Parliament Thursday, he said that apart from a horticultural university, no other project has been given to Telangana.

"Horticultural university sanction issue was mentioned in State Reorganization Bill. It's not a new thing," the chief minister said in a statement.

The union budget simply mentioned that the commitments of the Reorganization Act will be fulfilled but no specific mention has been made, he added.

YSRCP response on Budget 

Arun Jaitley, the Union Finance Minister, presented Rs 17.98 lakh crores annual budget for FY 2014-15, with a fiscal deficit of 4.1% of GSDP and Revenue deficit of 2.9% of GDP. It is difficult, if not impossible, to meet these two targets considering the fact 45.6% of the fiscal deficit and 53.6% of revenue deficit budgeted for whole of 2014-15 was already incurred in the first two months of the current fiscal. 

It is surprising as to why the FM did not bring out these facts in his budget speech. In the absence of a plausible explanation as to how he can achieve the deficit targets in the face of aforesaid performance for the first two months of current fiscal, all other aspects of the budget have to be taken with a pinch of salt. We cannot forget that Mr Chidambaram had to cut the budgeted Plan Expenditure by Rs one lakh crores to meet his fiscal deficit target of 4.6% for FY 2013-14.

We however welcome the following announcements in the budget

•The budget sought to boost investor confidence by declaring that in future there will not be any retrospective tax legislations and further that the system of advance ruling by income tax department will be introduced to avoid vexatious litigation. 

•Legislative and administrative changes to sort out pending tax demands of more than 4 lakh crore under dispute and litigation.

•It was further announced that investment allowance rebate reserve will be available for capital investments upwards of Rs 25 crores by manufacturing units. This is a right step under the present circumstances. 

•An investment of an amount of Rs 37,880 crores in NHAI and State Roads is proposed which includes Rs 3000 crores for the North East. Target of NH construction of 8,500 km will be achieved in current financial year.

•A sum of Rs 7060 crore is provided in the current fiscal for the project of developing “one hundred Smart Cities’

•`Rs 14,389 crore provided for Pradhan Mantri Gram Sadak Yojna(PMGSY)

•Present corpus of Pooled Municipal Debt Obligation Facility facility to be enlarged to Rs`50,000 Crore from Rs 5000 crore.

•A sum of Rs 4000 crores for NHB from the priority sector lending shortfall with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/ LIG segment is provided

•Corpus of Rural Infrastructure Development Fund (RIDF) raised by an additional `

•5000 crores from the target given in the Interim Budget to Rs` 25000 crores .

•Allocation of Rs 5,000 crore provided for the Warehouse Infrastructure Fund.

ISSUES ARISING OUT OF DIVISION OF AP

The FM said in his speech that ‘Government is committed to addressing the issues relating to development of Andhra Pradesh and Telangana in the AP Re-organization Act, 2014. Provision made by various Ministries/Departments to fulfill the obligation of Union Government.’ Whereas the said Act gave many assurances like extending financial support for building the new capital for the residuary state of AP, no allocation is made in the budget. Similarly, there seems to be no allocation made for Polavaram project in the current budget. 

Except for the announcement that the residuary state will get one IIT, AIIMS level hospital and an agriculture university, none of the other assurances given in the 13th Schedule to the AP Re-organization Act, 2014 find place in the Budget. They include 

1.establishment of one IIM, one IISER, one Central University, one Petroleum University, one Agricultural University, one IIIT, National Institute of Disaster Management and a tribal university

2.The other institutions proposed in the 13th schedule like Steel Plant at Kadapa, Petrochemical complex at Visakhapatnam, the upgradation of Visakhapatnam, Vijayawada and Tirupati as international airports, setting up of metro rail facility in Visakhapatnam city and in Vijayawada-Tenali-Guntur Metropolitan Urban Development Authority, promotion of Vizag Chennai industrial corridor. 

Whereas the FM gave the assurance regarding honouring commitments made in the AP Re-organization Act, 2014, what about honouring the commitments by given by Hon’ble Prime Minister Dr Manmohan Singh gave following assurances while participating in the debate on AP Reorganisation Bill in Rajya Sabha, which are reproduced below.

1.“Special Category Status will be extended to the successor state of Andhra Pradesh comprising 13 districts, including the four districts of Rayalaseema and the three districts of north coastal Andhra for a period of five years. This will put the state's finances on a firmer footing. 

2.The Bill already stipulates that the Central Government shall take appropriate fiscal measures, including offer of tax incentives to the successor states in order to promote industrialization and economic growth in both the states. These incentives will be along the lines extended to some other states. 

3.I would like to reassure Honourable Members that if any further amendments are needed to facilitate smooth and full Rehabilitation & Resettlement(R&R) for the Polavaram project, they will be given effect to at the earliest. Our government will execute the Polavaram project--let there be no doubt about it. 

4.The resource gap that may arise in the successor state of Andhra Pradesh in the very first year, especially during the period between the appointed day and the acceptance of the 14th Finance Commission recommendations by the Government of India, will be compensated in the Regular Union Budget for 2014-15.

5.The Bill already provides for a special development package for the backward regions of the successor state of Andhra Pradesh, in particular for the districts of Rayalaseema and North Coastal Andhra Pradesh. This development package will be on the lines of the K-B-K (Koraput-Bolangir-Kalahandi) Special Plan in Odisha and the Bundelkhand special package in Madhya Pradesh and Uttar Pradesh.”

It may well be argued that item nos 2 and 3 supra form part of the AP Re-organization Act, 2014 and therefore no special mention was necessary in the budget speech. What about item no 1, 4 and 5 supra? How is it that no mention is made in the FM’s speech about these assurances? Should we conclude that the Union Government has decided not to honour the commitments made by Prime Minister as part of passage of the AP Re-organization Act, 2014? 

•Does it mean that the Resource gap will not be met out of the Union Budget? 

•Does it also mean that the residuary state will not get Special Category Status? 

•Is it not a fact the present FM who was the Leader of Opposition in Rajya Sabha said that the BJP was certain to come to power and that they were committed to not only honouring Dr Manmohan Singh’s promises but will extend the Special Category Status for ten years? 

•At this rate, what will happen to the residuary state?