Jagan alleged that states are receiving an average of 31.5 percent of devolution of taxes, against a 41 percent recommendation of the 15th FC.
Andhra CM YS Jagan in the assembly. (Supplied)
Is Andhra Pradesh Chief Minister YS Jagan Mohan Reddy, known to be friendly with the BJP all these years, changing his mind a couple of weeks ahead of elections?
It appears to be so if his reply to the debate on Motion of Thanks to the Governor on 6 February is any indication.
He concluded his reply by saying, “The special status could give relief to the state government’s current scenario but it has not been included in the Act to go and fight legally. The least I wish is that any party shouldn’t get an absolute majority in the centre so that to extend our support we can ask for the special status in return.”
Andhra Pradesh, scheduled to witness simultaneous elections to the state Assembly and Lok Sabha in a couple of months, commenced the Assembly session on 5 February to present the vote-on-account budget.
The Interim Budget for 2024-25 will serve as a vote-on-account granting the government to allocate specific funds until a new administration assumes office following the Assembly elections scheduled for April-May.
State Governor Abdul Nazeer began the session with praises for the four and a half years of YS Jagan’s administration.
In reply to the discussion on the Motion of Thanks to Governor on 6 February, Chief Minister YS Jagan addressed the Assembly even as 13 TDP MLAs were suspended from the house.
The TDP MLAs demanded Speaker Tammineni Sitaram allow discussion on inflation and hike in power tariffs but were denied the opportunity, followed by their suspension.
Jagan explained the state finances through a PowerPoint presentation and said a low share in the devolution of state funds and Covid-19 resulted in debts. However, he slammed the TDP for handing over the state with accumulated high debts.
In a rare move, YS Jagan, who is alleged to maintain soft relations with the BJP, criticised the Union government for allocating a lesser share for the states in the devolution of funds. He also blamed the biased bifurcation of the state, for the state’s fiscal position.
Joining late in the South Tax Movement (an online campaign by southern states over fiscal injustice), the Andhra Pradesh chief minister alleged injustice in the devolution of funds to Andhra Pradesh.
He stated that the state government witnessed a loss of state tax revenues amounting to ₹38,916 crore, alongside a decline in the Union government’s devolution of funds due to Covid-19, totalling ₹27,200 crore for Andhra Pradesh, ultimately reaching ₹66,116 crore.
He claimed that due to the impact of these losses and the increase in expenditure, he had to borrow and justified it saying it is the same case across the world.
He added that the state was also receiving less revenue from the Union government, despite the 15th Finance Commission suggesting a share of 41 percent of central taxes (excluding cesses and surcharges).
“In the 13th Finance Commission recommendations of 32 percent for 2010-2015, the states received only an average of 28 percent of the devolution of funds. The 14th Finance Commission recommended a devolution of 42 percent of central taxes to states during the period (2015-20); however, the states have received only a 35 percent average against the recommendation. It is further worse in the 15th Finance Commission, as it has recommended 41 percent for the next five years but receiving only an average of 31.5 percent.”
Although @ysjagan joined the #SouthTaxMovement late, he highlighted that states are receiving a smaller share than what was recommended by #FinanceCommission.
He even mentioned that #AndhraPradesh lost #Hyderabad, which was an economic powerhouse generating significant revenue… pic.twitter.com/U7Tq2B8Z1P
— South First (@TheSouthfirst) February 7, 2024
As per the presentation, notably, the Andhra Pradesh GSDP was ₹13,03,524 crore in 2022-2023 but received only ₹38,381 crore from the Union government through devolution of funds.
In the recent interim budget for 2024-2025 by the Union government, Andhra Pradesh received ₹49,364 crore, showing an increase from ₹41,391 crore in the past year, 2023-24.
Though there is a minor gradual increase, the presentation pointed out that the Union government has enhanced tax levies in the form of cesses and surcharges, placing the proceeds beyond the reach of the states.
This is not an allegation from YS Jagan alone, the Karnataka government led by Congress, the DMK-led Tamil Nadu government, and the CPI (M)-led Kerala government also echoed the same sentiment.
This controversy intensified when DK Suresh — a Congress MP and Karnataka Deputy Chief Minister DK Shivakumar’s brother — criticised the reduced allocation of funds to Karnataka in the interim budget.
As explained earlier by the South First, unlike direct or indirect taxes that go into the divisible pool to be shared with states, collections under cess and surcharges go directly to the Union government and aren’t shared with the states.
The report further states, “Since 2017-2018, the Union government has increasingly raised cess and surcharges, raising huge revenues, but none are being shared with the states. In seven years, collections under cess and surcharge increased by 153 percent.”
YS Jagan, speaking on the fiscal status of the state with debts, pointed out that the bifurcation of the state resulted in an annual income loss of ₹13,000 crores, leaving the capital Hyderabad to Telangana, which was developed jointly for decades by both states.
“AP is incurring a loss of ₹13,000 crore every financial year due to biased distribution of assets under the AP Reorganisation Act 2014. A state should have economic powerhouses. The cities like Hyderabad, Bangalore, and Chennai are absolutely essential for any state for revenue generation; otherwise, the state revenue would never increase,” the chief minister said.
“The state’s own tax revenue for 2018-2019 for Andhra Pradesh was ₹58,000 crore against its population of around 5 crore, while Telangana had its own tax revenue of ₹64,000 crore against its population of three and a half crore,” he explained.
He also pointed out the low buoyancy tax revenue for Andhra Pradesh considering a majority of the population was dependent on the agriculture sector.
He stated that Andhra Pradesh’s ability to generate tax revenue is low because 34 percent of its GDP contribution comes from agriculture, whereas the national average stands at 18 percent and Telangana at around 17 percent.
He said that, despite this, his government had been implementing schemes for the poor but not even a single welfare scheme was implemented during the TDP rule, though the budget was the same and the debt-growth rate was higher.
“The debt of residual Andhra Pradesh stood at ₹1,53,000 crore, including all types of loans, at the time of bifurcation and it had gone up to ₹4,12,288 crore in 2019 by the end of TDP tenure. After the YSRCP has come to power, now, the total debt stands at ₹7,03,000 crore, indicating that the growth rate of debt during the TDP rule stood at 21.87 percent and it stands at 12.13 percent during the last 5 years,” he said.
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