2 TDP ministers to resign from Union Cabinet today: Andhra CM Naidu

The Narendra Modi government on Wednesday reached out to its upset Andhra Pradesh (AP) ally, the Telugu Desam Party (TDP), but to little avail.

Hours after Finance Minister (FM) Arun Jaitley promised AP funds equivalent to what a special category state receives, the two TDP ministers in the Modi government were instructed to quit the Union Cabinet on Thursday by their party leader, Andhra Pradesh Chief Minister (CM), N Chandrababu Naidu.

At a press conference in the evening here, Jaitley said the Centre was committed to meeting all promises made to AP at the time of carving out of Telangana four years back, but rejected its demand for a special status.

When Jaitley was asked about TDP’s threat to pull out of the National Democratic Alliance (NDA) if more funds are not allocated, Jaitley said: “Political issue cannot increase the quantum of money because the Centre has no free floating funds. Every state in India has the right to the central fund in the same manner. Sentiment does not decide quantum of funds, it is the constitutional award of the Finance Commission which decides on the quantum of funds that the states get.”

By late night, TDP ministers – Civil Aviation Minister Ashok Gajapathi Raju and Minister of State for Science and Technology Y S Chowdary – were asked to send in their resignations. The TDP has 16 members in the Lok Sabha (LS) and six in the Rajya Sabha. It was not clear whether the TDP would continue to provide outside support to the Bharatiya Janata Party (BJP)-led NDA at the Centre.

Naidu said in Amaravati that the two ministers will resign from the Cabinet. “This is the first step. We will go ahead with other actions later,” he said. The TDP was an ally of the BJP during the NDA-I years from 1998 to 2004, and then again from 2014 onwards.

The BJP, on its own, commands a majority in LS, but TDP’s walking out of the NDA comes on the heels of another ally, the Shiv Sena, also threatening to quit the ruling alliance.

While the Andhra CM consulted with his party legislators in Amaravati, Civil Aviation Minister Raju attended the Wednesday meeting of the Union Cabinet, sources said. According to a PTI report from Amaravati, nearly all party legislators and Members of Parliament (MPs) urged Naidu to walk out of the NDA.

Sources in New Delhi attributed TDP’s decision to the compulsions of the Andhra politics, where its rival parties, the YSR Congress Party (YSRCP) and the Congress, have criticised the TDP for failing to secure ‘special status’ for the state. The YSRCP had threatened that its MPs would quit the Lok Sabha on April 6.

AP assembly polls are scheduled to be held along with the LS polls.

In New Delhi, Jaitley said giving special category status, as demanded by the Andhra CM, to any state apart from those in the North East and three hilly provinces is not constitutionally possible after the implementation of the 14th Finance Commission recommendation.

But, the FM said, the Centre would make up for any shortfall by giving AP funds equivalent to what a special category status state gets.

For special category states, the Centre meets 90 per cent of the funds required in a centrally sponsored scheme (CSS) as against 60 per cent in case of normal category states. The remaining funds are provided by the state governments.

The FM said the Centre had committed 90 per cent of the funds for CSS in AP, equivalent to special category states, through other external agencies like World Bank, but the state government wanted funds to be routed through agri-lending bank Nabard. The Centre is agreeable to even that provided a mechanism is worked out, he told reporters at his office here.

Asked about Congress President Rahul Gandhi’s promise to give the state the special category status if his party is voted to power, Jaitley said, “I still have to follow constitutional award” of the 14th Finance Commission. He said the Centre is committed to give funds to AP equivalent to what a special status state gets, he said.

The 14th Finance Commission raised the share of states in taxes collected by the Centre to 42 per cent from 32 per cent but abolished special category states.

“The principal issue relates to what is the implication of a special status. The special status was originally granted to states in the North East because they have their own resources which were inadequate and the revenue was inadequate,” he said.

Jaitley said while the promise of special category status to AP was legally possible when the state was bifurcated, there is no such category after the constitutional award by the 14 Finance Commission.

“Instead states which are in deficit in terms of revenue, we are compensating them because everyone gets a hike of 10 per cent to 42 per cent plus for a certain period; revenue deficit will be taken care of and a provision for revenue deficit was made in the case of AP,” he said.

For AP, the 90:10 funding of schemes instead of usual 60:40 would be implemented “notwithstanding the fact that the word ‘special status’ is not there”, he said.

During consultations in 2016, it was proposed that the grants given by external agencies like World Bank, ADB and JICA to Andhra Pradesh would be repaid 90 per cent by the Centre and the remaining 10 per cent by the state.

However, in January this year, the state government modified the request and demanded the money through Nabard. “Now if Nabard gives directly to the central government, it gets added to the fiscal deficit. If it gives to the state government, it will get added to the state’s fiscal deficit, and therefore reduces the borrowing capacity of the state,” he said.

To overcome this, it was proposed last month that a special purpose vehicle be created in the state which deals with the development work. The Nabard fund will come into that corporation and the money would be repaid to Nabard in the 90:10 ratio.

“We are awaiting a response. I hope it is a positive response, and the state tells us in what manner it wants it,” he said. “At no stage has the Centre said it won’t give it.” Jaitley hoped for a positive outcome as he believed that the state needed assistance.

On revenue deficit, he said Rs 400 billion has already been paid for 2014-15 and only Rs 1.38 billion remains.

On the demand for tax incentives, he said in his Budget proposals he has already announced measures like investment and depreciation allowance.

“AP has suffered because of bifurcation and whatever support is required because of that (we will give),” he said, adding all issues have to be resolved within the framework of Centre and state relations.

With additional inputs from PTI