Not much cheer for Andhra Pradesh

The Union finance minister, Mr Pranab Mukherjee, too has thoroughly disappointed Andhra Pradesh by ignoring all its specific demands in his Budget as his Cabinet colleague, Ms Mamata Banerjee, did with the Railway Budget last week.

The Budget did not give any indication that the Centre was ready to accept the Chief Minister, Dr Y.S. Rajasekhar Reddy’s demand to declare his pet irrigation projects as national projects. Dr Reddy wanted Polavaram, Pranahitha-Chevella and other irrigation projects to be given such a status.

Similarly, while the finance minister announced textile hubs to mitigate weavers’ problems in Tamil Nadu, West Bengal and Rajasthan, he ignored the state where weavers are facing an equally severe crisis.
The state government was disheartened and the state finance minister, Mr K. Rosaiah, skipped the proposed media briefing at the Secretariat and cancelled his television appearances.

The state’s share in the devolution of Central tax pool too will drop by Rs 500 crore because of dip in tax collection. The state is expected to suffer a loss of Rs 3,000 crore because of the reduction in the Central Sales Tax rate.

There was uncertainty over the benefits the state would derive out of the Rs 3 kilo rice scheme announced by the Centre,

“The Centre is presently extending subsidy under different components for BPL and APL families,” said a senior official. “If the same procedure is followed we stand to gain by Rs 400 crore but if the Centre clubs all the schemes we will lose by Rs 200 crore.”
However, as a silver lining, the borrowing capacity of the state will be increased because of further relaxation of the Fiscal Responsibility and Budget Management (FRBM) Act.

This will help the cash-starved state to raise funds at the hour of crisis. It was to put an end to the indiscriminate borrowings by states that the Centre brought the FRBM Act which restricted borrowings to 3 per cent of the Gross State Domestic Product. Following recession the Centre enhanced this to 3.5 per cent and then to 4 per cent in the budget. Accordingly, the state’s borrowing capacity has been increased to Rs 16,000 crore from Rs 12,000 crore.

Reduction in the interest rate on crop loans by one per cent will also help the state.
It is already subsidising the interest with its own funds to meet its promise of 25 paise interest to farmers and Centre’s decision will help it to save Rs 250 crore.

AP will also benefit from substantial increase in NREGP, 18 per cent of whose funds are utilised by the State. “We are likely to get Rs 6,000 crore this year,” a senior official said. “We will also benefit from enhanced JNNURM funds.”