Special Category States Are A Scandal; Naidu Caught With His Hand In The Cookie Jar

It is ironical that a bifurcated Andhra Pradesh today is demanding the special status; Naidu’s previous term as chief minister saw all efforts concentrated in Hyderabad, with precious little elsewhere; this was also responsible for his defeat in the Assembly election that followed


Chandrababu Naidu, Andhra Pradesh’s chief minister, is on a warpath since his plea for special category State (SCS) status for his State has not been acceded by the government. SCS category evolved out of the PB Gajendraragadkar formula. The broad contour of this formula was that States identified as SCS would receive 90% of financial assistance as non-repayable grants-in-aid and 10% as loans. States that were identified as SCS were Jammu & Kashmir, Punjab and undivided Assam — all border States. Ironically, West Bengal, despite being a border State and severely affected by Partition, never got the status.

For non-SCS States, the formula was 90% loans (with huge interest liability) and 10% grants-in-aid. The Atal Bihari Vajpayee government expanded the scope of SCS category when it created several new States such as Telangana, Uttarakhand, Chhattisgarh, Jharkhand, etc and included Sikkim too.

Except for Sikkim and, to some extent, Uttarakhand, very few other SCS States have succeeded in attracting private investment aside from improving their infrastructure. However, SCS status has become a byword for giant loot and pillage. States have fraudulently drawn lakhs of crores of rupees and subjected them to arbitrary misuse and misapplication, throwing accountability to the winds. Bogus utilisation certificates have been wantonly accepted by the government ministries that raise great doubts about their integrity too and that of their ministers as well (and that includes the Ministry of Finance).

If one were to put all sanctions for grants-in-aid, say for roads, over a span of three decades, the balance sheet would not tally, i.e. official and claimed achievement have huge margins of difference. Extend this to each and every sphere, and one would be looking askance at lakhs of crores of rupees siphoned, embezzled, simply vanished into thin air. If one looks at the annual reports of the SCS States, it would not be unusual to find most of these States at the bottom of generally accepted QLI parameters.

It is not without reason that the Panama Papers exposed a large number of bank accounts, nearly all of which were associated with persons located in these very States or having dealings with these State governments.

Insofar as united Andhra Pradesh is concerned, I find it ironical that a bifurcated State today is demanding the SCS status. Naidu’s last term as chief minister saw all effort concentrated in Hyderabad, with precious little elsewhere. This was also responsible for his defeat in the next assembly election. What is even more ironical is that coastal Andhra Pradesh (Seemandhra) gave the short shrift to over several decades that ultimately led to Andhra Pradesh’s bifurcation.

Huge corruption was reported by the CAG and several investigative agencies during both the Naidu and YSR regimes, but all were safely brushed under the carpet.

All that happened was that there was a massive influx of job-seekers in Hyderabad from coastal Andhra Pradesh while their fertile lands fell prey to unscrupulous developers (remember LANCO?), all of whom owed allegiance to or were fronting for TDP leaders. Nothing was different from what happened in all other SCS States.

I was posted in Secunderabad in 2000-03 (during the Naidu regime) and travelled widely over the State (and into many remote areas), aside from having met Naidu and his family on several occasions. The sense of deprivation was palpable everywhere.

Amaravati: The capital of the truncated Andhra Pradesh has seen massive government investment, with the private sector hardly showing any interest to develop the city because of a questionable reputation of the State government

Naidu today must wear the badge of Telugu pride in competition with his YSR opponents who too are doing the same, all for the 2019 elections. Naidu’s current regime is Amaravati-centric, a symbol of Telugu pride but a non-starter so far but for a secretariat building and a home for Naidu.

The TDP is also all but a tenant in Hyderabad for another 5-6 years. Small cash will not raise Amaravati from the Mother Earth upward nor leave surpluses to fight the Assembly election next year. And that could be Naidu’s cause for strong worry.

If Naidu teams up with an even more corrupt YSR Congress, he would be viewed as a collaborator with the Congress, a strict no-no. The BJP has assessed his predicament correctly — that he has no other takers — which was why he had left the door ajar for a while by staying on in the NDA until 16 March. It is also not as if he has a steamroller majority like the TMC in West Bengal or the AIADMK in Tamil Nadu. Naidu will, in all probability, cede a third of Andhra Pradesh’s 25 Lok Sabha seats to the YSRC in the next election.

Yet, the BJP can ill afford to do without him as his present threat is one of many rumbles coming out of the NDA as the next general election nears — more so since the drubbing the BJP received at the recent by-elections in Uttar Pradesh, which has the constituents of the NDA whispering about Prime Minister Narendra Modi’s vulnerable areas.

Andhra Pradesh has 25 Lok Sabha seats, five times more than those of all the States in the Northeast (except Assam) put together. Bihar’s Nitish Kumar is a turncoat on a political merry-go-round and peeved at being denied the SCS status himself. The Shiv Sena has already decided to go on its own in 2018-19 while the NCP is getting ready to project their CEO as the next PM! But the situation will change if the YSR Congress Party ties up with the NDA and more than compensates for the loss of TDP.

Yogi Adityanath in Uttar Pradesh will have done almost two years by 2019, enough time to gain negative votes. Madhya Pradesh, Rajasthan, Chhattisgarh and Jharkhand have a large number of Lok Sabha seats. Even a 20-30% loss for the BJP in these States could mean a loss of majority in the Lok Sabha. Chief Minister of Karnataka Siddaramaiah may just about manage to retain Karnataka for the Congress. ’s AIADMK is currently in the throes of a power struggle and the usual resistance of TN voters to accept any local party that supports a Hindi/Hindu-based ‘north Indian’ party and the rising DMK star, MK Stalin, probably a far more competent and younger candidate. But TTV and superstar-turned-politician Rajinikanth could disturb these calculations.

The goods and services tax has also hit manufacturing in Tamil Nadu (Maharashtra, Karnataka and many other major States) very hard. Also, for this reason, the AIADMK, with its huge Lok Sabha strength, is far from being a certain support base for the BJP at the Centre. Kerala, West Bengal, Punjab and Odisha will probably retain their local flavours. After the near loss in Gujarat, the BJP would do best not to take its home ground for granted.

Times are indeed trying particularly with the government not very far from bankruptcy, ill-placed to accede to any more SCS requests. The government is virtually living off borrowings, forcing central public sector units (CPSUs) to cough up far more dividends than what they can legitimately afford, sale of private sector shares held by the government, underwhelming CPSU IPOs, alarmingly rising bank frauds and NPAs, overawed by the burden of an increasingly belligerent China and its Pakistani ally with Russians being passive bystanders and Americans providing moral support alone (that too with hiccups), overwhelmed by rapidly rising revenue expenditure and myriad more. None of the schemes grandiloquently announced or renamed has taken off e.g. the MoD recently admitted, in an RTI reply, that ‘Make in India’ in that sector had attracted just about Rs. one crore in private investment so far.

Realizing the fiscal incapacity of the government, more demands for SCS status will surface in the coming weeks and months as a realignment of political forces takes place. Erratic collection of GST revenues and losses caused to manufacturing States will leave less and less money for prospective MPs and MLAs to make larger, bogus promises and provide illicit resources to fight elections.

The inability of the government’s policies to create jobs to generate demand to bolster the sinking economy may cause a huge realignment of unscrupulous politicians, leading to unlikely alliances for the next general election, a cause of genuine worry for the BJP.

SCS has thus become a bugbear for the BJP as large government spending has become almost impossible without printing more and causing inflation (and interest rates) to rise as is currently happening. SCS is a potential iceberg to the Titanic of our nation-state!

Naidu is holding himself out as a prospective prime ministerial candidate by creating an illusion of morality couched as the protector of States’ rights over an uncaring Centre. Sounds ludicrous? Politics is the art of the impossible.

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