Tamil Nadu CM Jayalalitha has expressed serious concern over the central governments’ proposal to give special category status to Andhra Pradesh and also extend tax breaks.
In a letter to PM Narendra Modi, the Tamil Nadu CM said any such move would cause a huge flight of capital and relocation of industries from neighbouring states.
“It would also make the neighbouring states totally uncompetitive. In fact, such concessions to new industries would render existing industries, both in neighbouring states and even in the states where such concessions are granted, completely uncompetitive. These are grave risks which cannot be ignored,” Jayalalitha said.
“Your government must exercise the greatest care in approaching this issue. Nothing should be done which would distort economic incentives or a level playing field and render states like Tamil Nadu uncompetitive vis a vis their neighbours,” she said.
It is also worth noting that such area-based exemptions are also fiscally very expensive for the union government. The Statement of Revenue Foregone presented to Parliament in July last, along with the Union Budget, indicated that the total revenue foregone through such area-based tax concessions during last fiscal was Rs 9,267.5 crore in direct taxes and almost Rs 18,000 crore in excise duty. These could have been shared with the states, Jayalalithaa remarked.