Andhra’s’ budget deficit is the legacy of their own making

By: J R Janumpalli

Before demerger of state, Andhras were saying that if A.P. was divided, Telangana will not survive as a state, alleging that Telangana is dependent on Andhra for its economy. But it is proved wrong. Actually Residual A.P. is on the receiving end. It is staring at a massive deficit budget. TS has emerged as a state with a balanced revenue and expenditure and is presently comfortable in spending for the state’s administration and development. Whereas, the residual A.P. is reeling under deficit budget and resorting to overdraft from RBI. And looking for special assistance from the center, proffering the deficit card. The Finance commission has provided to adjust its deficit over a period of 5 years. The center also rustled up some 15000 cr, special assistance. The assistance to TS is tweaked to help Andhra. Yet A.P. is not happy. It is demanding for special financial status. There is also said to be a curious move for special autonomy to the state in some quarters.

It is, of course, between the Center and A.P. to settle for whatever financial assistance A.P. is eligible to get. But A.P. raising the bogey of bifurcation of the state as the cause of their deficit and trying to give an impression that the TS is benefited at the cost of Andhra is not true. It is a complete travesty of truth. As a matter of fact Andhra region was deficit since 1952 and continued to be so after merger with Telangana from 1956 to 2014. Its deficit is the legacy of its partisan spending of Telangana revenue surplus in Andhra region. Andhra administration has done it continuously in all the 58 years of the merged state.

It is alleged by Andhras that they have created a large revenue base for Hyderabad and the lack of Hyderabad revenue is creating the deficit to them. Hyderabad city was providing lion’s share of revenue to the state both in Nizam’s dominion, Hyderabad state and united A.P. It is no surprise, as it is the same case with all the metropolitan city capitals like Madras, Bombay, Calcutta and Bangalore. Moreover, the peculiarity of united A.P. is that the percapita revenue in Telangana was much more than that of Andhra. The Dhar commission 1945-48; State reorganization Commission(SRC) 1955-56; Kumar Lalith commission 1956 to 68; Rosaiah’s statement in the Assembly for 2003-2007; budgets of both the states for 2014-15; 14th Financial commission projections for 2015-2020 — all their estimations/findings will vouchsafe the fact. The percapita revenue excess of Telangana was ranging from 38.94 to 106.21% over Andhra.

The case of Andhra and Telangana was different from other states reorganization. It was a merger of two states. Andhra was suffering from deficit finance from 1952 to 1956. Andhra, wanted to get merged primarily with Telangana for its revenue surplus and first class city capital of Hyderabad. In all the 58 years the Telangana region was revenue surplus and Hyderabad, was contributing more revenue to state like before. Andhras were in the merged state only for 58 years. Whereas Andhras were in Madras state for more than 150 years with more than 30% population in Madras city. Likewise Gujaratis were in Bomaby for a few centuries. The new Andhra and Gujarat states could not get their old capitals of Madras and Bombay respectively. There was no contention for the revenue of the capital there. In such a scenario Andhras claiming that they are the reason for large revenue of Hyderabad in just 58 years is an absurdity. Hyderabad is 400 years old and was 4th largest city in India in 1950’s.

Let us now examine for veracity, the available statistics in the matter. The following table (source: Goutham Pingle, New Indian Express) shows the excess of per capita revenue of Telangana over Andhra since 1945, including the projections for 2015-16 to 2019-20 by FC. It ranges from 38.94 to 106.21%. Even if we take the figures of 14th Finance Commission projections for the period from 2015-16 t0 2019-20 based on the statistics and financial history of the united state in the past it comes to 38.94%.

(14th Finance Commission Estimates)
Now if we analyse the Financial Commission figures given above, we will understand the following. The pre- devolution revenue of the 5 year period of A.P. is 78815 cr and TS is 78251 cr on an average per year. Though the population as per 2011 census is 4.94 cr for Andhra and 3.53 cr for TS, the revenue is almost equal. But there is a big variance in the expenditure. The average expenditure for Andhra is 117375 cr and for TS it is 73856 cronly. It indicates 48.92% more expenditure in Andhra. The average deficit for Andhra is 38360 cr. per year where as TS earns surplus for all the 5 years with an average surplus of 4394 cr.

In per capita terms the expenditure in Andhra is 118800 as against the revenue of 79772 per person. In TS it is 104613 expenditure as against a revenue of 110837 per person. The average deficit of 38,360 cr per year is entirely on account of Andhra, as TS has a 4394 cr. surplus. Therefore it is a double whammy for Telangana both from the point of gross and per capita revenue collection and expenditure for all the 58 years. It clearly indicates that the entire deficit is due to excessive expenditure in Andhra.

In such circumstances holding bifurcation as the reason for their deficit or as a great injustice to them is an unsubstantiated claim. It has no merit whatsoever. The bifurcation did not do any injustice to Andhra. It has only paved the way for the full enjoyment of its revenue by the deliberately impoverished Telangana in all the years of coexistence with Andhra. It is only a hard earned justice to Telangana after a 58 year struggle, albeit a pyrrhic one with a humongous loss of revenue.

If the exploitation of Telangana is stopped, after a huge loss of revenue and resources in all walks of life by demerger, how can it become an injustice to Andhra? Telangana was against the merger in the beginning itself. It was protesting time again on the use of surplus revenue from Telangana. In 1970 in the aftermath of 1969 agitation it was estimated that from 1956 to 1968 at least 65 cr surplus revenue of Telangana is spent in Andhra region. And it was agreed to spend that amount in Telangana in the subsequent years to make good the loss and also not to spend surplus Telangana revenue any morein Andhra. They have never implemented the agreements, like many such agreements, and continued the spending of Telangana revenue in Andhra without any qualms. Thus they were used to depend on the spending of Telangana revenue in Andhra for all the 58 years creating a permanent deficit budget in Andhra region.

Now because of the bifurcation of accounts of residual A.P. and TS by the 14th Finance Commission the truth of the matter is brought out so succinctly. The difference of availability of funds to the two states also explains the situation very clearly. In such a scenario, it is absurd for Andhras to blame TS and whine for their deficit. They have got in to this unenviable situation because of their avarice of eating in to the revenue of Telangana continuously for all the 58 years of the united state, despite opposition to it. Their opposing formation of TS tooth and nail is also for the same reason.

Thus, their deficit budget is the legacy of their past and their profligate use of Telangana revenue. The responsibility is theirs entirely. Ironically, it translates to the saying ‘ulta chor, kotwal ko dantna’, if they are trying to blame TS for their greed and impropriety.

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13 Responses

  1. Gopi Krishna says:

    Good one and well articulated

  2. Nice and comprehensive article. Drives home the point well

  3. Vanga Madan says:

    The content in toto is both actual and factual and is logistic.
    Thanks and Regards,
    Vanga Madan.

  4. Prashant S says:

    Its really good article. This needs to be sent central govt to expose Andhra drama. otherwise Central govt continue support financial to Andhra at the cost of other 28 states in India. ALso most of people in Andhra including rich society always tax avoidance compare to telangana. Central govt take all these into consideration before taking any hasty decision of declaring special status to Andhra which will effect other neighbor states like telangana, Maharashtra, Gujarat, tamil nadu etc.

  5. J R Janumpalli says:

    Friends,
    Thanks for your good words and support. The same article with a little editing and in the name of’Andhra Deficit Misinterpretation’ is posted in ‘Hans India’. I sent it to a score of our friends for Info.& comment and posted in Facebook also. The reaction was very muted.Sri Guatham Pingle, who was foremost in supporting Telangana since the beginning in this episode of TS campaign, was writing among other things on this revenue and budget issues of Telangana. He was painstakingly researching in to the statistics, which were very hard to come by because of the non-cooperation and fudging by Andhra administration. Yet, he has given very scholarly inputs via new Indian express & other papers in this matter, which I have made use of and acknowledged. He was very happy and graciously appreciated it.Sri Subhash C.Reddy who is another live wire supporter of TS was very supportive on this. But, from others there was not much enthusiastic response. I am not looking for appreciation of my journalistic skills, which I know are very modest and not matter much. What I am looking up is the correction of the motivated disinformation of Andhras on TS.
    As I understand many of our compatriots feel that finding fault with andhras in the post-split scenario, is not in good taste and it should be spurned. While they are right in the matters relating to the consequential discomfiture, if we are gloating on it.But, here what we are trying to do is to set the picture right in the matter of finances of both the states, in the face of their motivated disinformation. Now that the Finance Commission sifted the information and came out with some authentic figures, we cannot gloss over their propaganda. Because of that we have already lost some funds from the Center. It is important for us, as we had to contend with nationwide publicity by them.
    Therefore, I feel we can not flinch from saying a spade a spade, where our state interest is concerned. There is no need to feel diffident on it, while they denigrate us with false information.

  6. J R Janumpalli says:

    Andhra Budget Deficit Misinterpretation (2 May, 2015 || Hans India)
    (http://www.thehansindia.com/posts/index/2015-05-02/Andhra%E2%80%99s-Budget-Deficit-Misinterpretation-148312)

    The views expressed on Andhra Budget Deficit in the two articles were endorsed by Sri Ch.Hanmantha Rao, former Planning commission Member, in his Inaugural Address at the Interactive Orientation Programme for Elected Representatives (Telangana Rashtra Samiti) of Telangana State, Nagarjuna Sagar, 2-3 May, 2015.Here is the text of his observation.
    Major challenges to Telangana (May 11, 2015 || Hans India)
    (http://www.thehansindia.com/posts/index/2015-05-11/Major-challenges-to-Telangana-150142)
    “The State of Telangana has the advantage of ‘surplus’ revenues on account of under-spending in the region in the past. On the basis of the data for the last 10 years, the projections made by the 14th Finance Commission show higher revenues and lower expenditure per capita for Telangana when compared to Andhra. The Bhargava Committee had brought out the same position for the 1950s and the 1960s. This position persisted over the last 60 years, but remained hidden so far because the accounts related to the undivided State as a whole.
    Now it has come into open because of bifurcation showing higher per capita revenue expenditure with revenue deficit for Andhra Pradesh State and revenue surplus with lower per capita revenue expenditure for Telangana state. Therefore, the misinformation being spread, particularly in Delhi, that Andhra Pradesh is a victim of bifurcation whereas Telangana is an undue beneficiary will not carry any credibility. The real position needs to be explained effectively by the elected representatives of Telangana.”
    There is need to counter the misinformation more vigorously to claim compensation for heavy loss of revenue in the last 58 years in the united state and not to lose our legitimate funds from central government to TS.

  7. venu says:

    My concern in the coming years would be that centre can dilute rightful funds/projects of telangana to AP. Centre may deny our share in the railway budget and annual general budget that would declare new projects, institutions, industrial parks, SEZs to our state as seen in the last budget. We need to up the campaign against misinformation.

    Moreover, AP is not loosing anything- the deficit would be filled by centre, and there is no directives from the centre to reduce the expenditure of AP. There would be proportionate annual increase in the expenditure of AP irrespective of the deficit. Most importantly deficit is not paid from anyone’s pocket in andhra, the rich farmers continue to have zero taxation apart from other other agriculture subsidies like loan waiver, canal irrigation etc.

  8. sree says:

    Statistics can be interpreted in any way one choose. In a combined state every citizen of the state should have had equal access to the revenue not based on what a region contributes.By the authors own admission the state was spending 79772 per person in Andhra versus 104613 per person in TS for 5 years prior to devolution. If we all want to spend the revenue proportionate to where it is generated it will not be fair as priorities of different regions are going to be different.If proportionate basis of spending is a good basis then Rayalaseema generates less in today’s residual AP state, will it be fair if the new AP state spend less per capita on Rayalaseema region as it generates less revenue or should the state or a country spend equally well on all ts regions independent of revenue steams? If the former is true then most money in most states should be spend in districts with cities and industrialized urban centers only, if the latter is true than it is Andhra that was short changed by 20% per capita for the 5 years prior to demerger. On the other hand the title is very apt, Andrites not imagining a demerger scenario and not industrially developing their region and increasing the tax base despite having a lot of political power for 60 odd years is their own fault..

  9. Aditya says:

    ‘Statistics can be interpreted in any way one choses’ How? Is it like you are doing it now? The author said, ‘In per capita terms the expenditure in Andhra is 118800 as against the revenue of 79772 per person. In TS it is 104613 expenditure as against a revenue of 110837 per person.’, not as you fudged it.You are showing the less revenue in andhra as expenditure.Old habits die hard.

    Another point is, it is not because andhrites did not develop industries in andhra, the problem was nobody was coming forward to invest in andhra. It will be more or less same now also.As usual your obscurantism and obfuscation is reiterated here again.

  10. sree says:

    I stand corrected as far as the figures go for earnings; If look at spending the difference is very small. My point is in a combined state everyone had similar access to funding independent of revenue. So in principle you seem to believe that regions with lower revenues should not have access to better funding than what they contribute even if governed by same authority. So now Andhra region can spend less in Rayalaseema and uttarandhra, if they can show that these are poorer regions and don’t bring in much revenue.BTW Aditya, do have any bright ideas for poorer states in India that have less revenue due to agri-based economies and lack of a metro based industrial tax base to support them? other than eat less, spend less and remain poor…

    • Aditya says:

      So, you agree that,andhra is agri-based economy, lacked metro based industrial tax and gate crashed in to Hyderabad state in 1956,to eat telangana surplus revenue and continued to do so till 2014, despite protests,committe findings and agreements not to do so.The deficit budget as found out by FC exactly the same.That is what the author said with the relevent statics.Then what is your problem?
      That is why your andhra is shown the door.Now you give your bright ideas to make it rich.Already your world class leader is translocating a world class capital to make it rich overnight.You can add your own fantasy,with out picking hair on the surface of egg here.

  11. sree says:

    Aditya, Agri based regions will generate less taxes and will need support of regions with metros and industries to help them.As far as history, when linguistic basis for state demarcation was done not so well to do, non telugu regions of Hyderabad state went and joined another state with big cities to support them (Bombay and Bangalore).Is it fair to say these poorer regions of Hyderabad state gate crashed into Maharashtra and Bangalore? They were not moochers in the new states their taxes contributed to development of Hyderabad (just like rural telangana) but due to political decisions and aspirations to join a state which spoke same language they were reassigned to access funding of a different metro (Bombay-Bangalore).Andhra lost financial support of Madras and gained the same from Hyderabad. I am sure from days of Fort St.George Andhra people did pay their masters in Madras just like rural Telangana did to their Nizam. So to be fair if we compare we should compare per capita revenue of Madras state versus Hyderabad state (or rural Telangaan sans Hyderababad with Andhra). Taking revenues of smaller interim state of Telangana between 1947 and 1956 and comparing to newly poor agri based economy of Andhra which just lost the financial backing of a major metro will get you skewed results.

    It is also fair to say that most regions including Telangana historically didn’t do anything superior to other regions except that their rulers decided to build a capital in that region. Who knows why British decided to develop Madras rather than Machilipatnam, why did the sultans finally decided to make Golla Konda their capital rather than Aurangabad or Ahmednagar. If you feel that those historical factors should give a circumscribed region surrounding these areas a budget advantage to eternity then that is your view.

    People of today don’t have any control about what happened in the past and it is not fair to blame them for how states were bifurcated etc. I cant blame anything but history for Andhra’s problems. If Andhra people are moochers they are no more than people of Marathwada, uttara Kanara, rural Tamil Nadu and for that matter rural telangana…all these regions paid in blood and surplus agri finances to a build capital and industrial base some where or the other. The states reorganization greatly favored Telangana state as it exists now ( getting rid of majority of poor regions ( marthwada, uttara Kanara and now Andhra and Rayalaseema) but retaining its main tax base and metro. Andhra lost the support of a metro region permanently after being bounced around; it is a victim. Its agriculture surplus was largely invested in regions that now don’t belong to it…while Andhra govt. revenues were low due to tax structures the people there had surplus and did contribute to the metros, its not easy to measure that and hence easy to criticize them as moochers using statistics like Govt. revenue figures . Finally, Andhra needs a rich city and Telangana needs rich villages. lets hope for the best.

  12. Aditya says:

    Dear Sree,
    Your perspective is always biased to Andhra. The Maharashtra and Kannada parts did not gate crash, it was recommended by SRC and Maharashtra and Karnataka took them willingly. It is not the same case with Andhra.SRC recommended against merger. Telangana too was against merger. Andhra politically maneuvered it and with the help of the center and gate crashed in to Hyderabad, with several conditions and agreements, including the condition that Telangana revenue should be spent in Telangana only.But, all the agreements in toto violated by Andhra and was shown the door for it now; that is the history. There is no comparison with any other merger in states reorganization with Andhra’s forcible merger. As long as you don’t understand it gracefully and make your obscurantist and obfuscating arguments day in day out it is not going to cut any ice.
    Andhra is not bounced around. It is Andhra which got separated from Madras on its own volition even before the concept and SRC came in to existence. If they have lost their metro in Madras it is their choice. You try to know the facts of SRC.Madhya Pradesh has lost, Nagpur a metropolitan city to Maharashtra in the SRC and has to settle with Bhopal a mere second tier town and there are several such instances in SRC.It is in today’s rupee value of about Rs. 20000 cr of Telangana revenue every year is spent in Andhra, as per the statistics of FC. In 58 years it amounts to 20000X58=1,16,000 cr.That is the revenue of Telangana in today’s value spent in Andhra, apart from many other appropriations in every walk of life like irrigation water, jobs, college seats, lands around Hyderabad etc. If all can be quantified as Shashi Tharoor quantified the loot of India by England in the 200 years of colonization in his Oxford Union speech, (http://www.ndtv.com/video/player/news/watch-the-tharoor-speech-on-british-rule-that-s-gone-viral/375995) in the 58 years of Andhra colonization, it will run in to several lakhs of crores.(Pl. view and hear the video for your education)
    If we don’t use government statistics, that too of Financial Commission of India, what statistics you want us to use. Your own and your world leader’s ‘kaki lekkalu’ and “ Kodi and Kumpati” stories for teaching Telangana how to wake up and live its life. Just wake up from the slumber of your Andhra bias and try to view the things with objectivity and have the grace to say a spade a spade. No point in believing your own prejudices as facts of the matter in this.
    If your farmers were rich and paid less tax and our farmers were poor paid more tax and now having surplus revenue and you have deficit revenue, it is not our farmers’ fault. If your farmers invested their agriculture surplus in Hyderabad , they did not do it for the state, they did it for themselves. They still are in the possession of their investments, enjoying them, continue to enjoy them and will not leave them to TS for free. That is the equation. We have our own rich and poor villages, and certainly try to make our poor villages rich. If you have all rich villages and all rich people, now make them pay more tax for more revenue to build a rich city for yourself. We don’ have any problem. Good luck! But don’t count hair on the surface of the egg for the legacy of creating your own revenue deficit, eating Telangana’s revenue surplus in the united state.
    I will stop here. I don’t have anything further to say in this matter.

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