Bihar, Andhra may get special sops in Budget on Tuesday

The government is considering options to compensate states such as Andhra Pradesh and Bihar that suffered because of bifurcation, which may include special assistance for infrastructure development and central support for externally aided projects besides taking help of experts in preparing state-specific compensation packages, four people aware of the development said on Saturday.

While some more time could be required to have a considered strategy to accelerate economic development, these states may immediately become part of initiatives such as a new smart city development plan, focused development of backward districts, enhanced post-devolution revenue deficit grants, new industrial hubs, the Aspirational Districts Programme (ADP), and irrigation, road, port and railway projects, they said, requesting anonymity.

“Some of these measures may find space in the Budget on Tuesday,” one of them said. Union finance minister Nirmala Sitharaman is scheduled to present the full-budget for FY25 in Parliament on July 23. The off-budget package under consideration may include substantial central assistance by way of repaying loans of externally aided projects, he added.

The government is unlikely to recreate the distinction between states with special category status (SCS) and non-SCS states after the same was abolished by the 14th Finance Commission (FC) that was set up by Manmohan Singh-led United Progressive Alliance (UPA), a second person said. “But, both the 14th FC and the 15th FC acknowledged the need for compensating Andhra Pradesh which lost most of the revenue resources to Telangana after bifurcation of the state in February 2014. While former PM Manmohan Singh promised in the Rajya Sabha on 20.2.2014 SCS status to Andhra Pradesh, the Narendra Modi government also subsequently expressed its commitment to providing special assistance to the state,” the person said.

During its interaction with the state of Andhra Pradesh in Amravati on October 11, 2018, the 15th FC said the issue of SCS was “forcefully” raised by the CM of the state but the issue would be a transgression of the presidential notification as it does not figure in its Terms of Reference (ToR).

“Philosophy of Special Category Status never emanated from any Finance Commission but from the resolution of erstwhile National Development Council (NDC),” commission chairman NK Singh said that day. Speaking on this matter with HT on Saturday, he said, “The position remains the same.” NDC was an apex body for deliberations on development matters. It was presided over by the Prime Minister and comprised Union ministers and CMs.

“The government is fulfilling, and will fulfil, all commitments that was made by former PM [Manmohan Singh] in February 2014 under the Andhra Pradesh Re-organisation Act. The Centre may do more than what was committed, not only for AP and Bihar but also for other states, something required if we want to make India the third largest economy of the world in five years,” the third person said. Similar requests have also come from Bihar, Odisha, Rajasthan, and Chhattisgarh and the government is willing to help them so that they can become India’s engine of growth,” he added.

Indicating that the Union government is favourably inclined towards AP and Bihar (allies of Modi 3.0) demanding a special package, people in the BJP said the party leadership is keen to maintain equilibrium in the alliance and smooth ties with the allies. The BJP-led NDA government’s stability rests on support from the allies, the TDP and the JDU, that together have 28 lawmakers in the Lok Sabha.

The TDP had parted ways with the BJP in 2017, alleging that the party in power had reneged on its promise of granting special category status to AP following the bifurcation.

“Amravati is a prestige project and CM Naidu has put it on record that he expects the Centre to be expeditious with grants. The BJP too is aware of the implications of the demand and the sentiment on the ground... and given the political sensitivity there will definitely be an effort on the part of the central government to address the aspirations of the alliance partner and the demands of the people,” said a BJP functionary not wishing to be named.

Referring to Bihar’s demand, the functionary quoted above said, the BJP leadership is committed to improving “the quality of life” in the state and helping build “world-class infrastructure”. In the state that goes to the polls next year, the alliance partner, the Janata Dal United or the JDU has also been vocal about the demand for a special package.

“The JDU is keen on infrastructure development. Every year there is loss of life and property on account of seasonal floods. This problem originates across the border with floodwaters from Nepal entering Bihar and can be solved by building barrages and carrying out work for interlinking of rivers... we are also hopeful of getting monies for metro and airport projects,” said a JDU functionary not wishing to be named.

The functionary said senior leaders of the party have conveyed their wishlist to the Union government and are hopeful that the funds required for the projects will be released well before the state polls scheduled for 2025. A NITI Aayog report on the SDG India Index 2023-24 released last week placed Bihar at the bottom of the index despite improvements on some parameters.

The party’s working president and Rajya Sabha MP Sanjay Jha said the JDU has conveyed that to help Bihar take a leap to the next level, the state will need a special assistance package.

“(Bihar CM) Nitish Kumar has for long campaigned for special category status for Bihar. As a party we have led this campaign. In the past few years Bihar has done reasonably well and that can be gauged from the GDP and other indices, but for the state to be able to leap to the next level we will need a special package for industry, investment and employment avenues. Given the BJP and PM Modi’s special attention to east India, we are hopeful of our demands being met,” Jha said.