Andhra to submit revised cost proposal to restart Amaravati, Polavaram projects to Centre

Prime Minister Narendra Modi with AP Chief Minister Naidu

The newly elected Andhra government will submit a report on inflation-adjusted costs to the Union Finance Ministry, seeking Central assistance to resume development of the proposed state capital of Amaravati and the Polavaram irrigation project, a person familiar with the development said.

"A revised detailed project report is being prepared. The rates between 2014 and 2019 will change, and after calculating all estimates, the extent of the financial assistance from the Centre will be known, after which the proposal will be submitted to them," this person said.

The N Chandrababu Naidu government plans to submit the proposal to the Union Finance Ministry to restart payments under the Andhra Pradesh Reorganisation Act, which bifurcated the erstwhile Andhra Pradesh into Telangana and the residual Andhra Pradesh. The Act includes provisions obligating the Centre to support the newly created Andhra state. The Centre halted the installments during the YSR Congress rule after the then government allegedly stopped work on some of the projects initiated by Naidu.

In the Lok Sabha elections, the Telugu Desam Party (TDP) secured 16 seats for the ruling National Democratic Alliance (NDA), helping the Bharatiya Janata Party (BJP) form the government despite lacking a majority.

Separately, a government official said that the Centre was disbursing installments to Andhra Pradesh as per the norms laid out in the Reorganisation Act, which included monies for the development of Amaravati. However, the entire amount was not disbursed because the previous YS Jagan Mohan Reddy-led government failed to deploy the funds to the specified projects, the official said on the condition of anonymity. The official added that restarting funds for the projects under the Reorganisation Act can be a way to address Andhra Pradesh's demands for special assistance.

The Polavaram irrigation project is an under-construction multi-purpose irrigation project on the Godavari River in the Eluru District and East Godavari District in Andhra Pradesh. According to the Reorganisation Act of 2014, this venture, like Amaravati, will also receive financial assistance from the Centre.

What about special status?

To be sure, assistance for developing the Amaravati and Polavaram projects is unrelated to the special financial package that Andhra Pradesh is seeking, the first person cited above said.

This person added that the funds for these two projects are connected to the Reorganisation Act, and the special package, which includes additional grants from the Centre, is a separate matter.

According to the central government official cited earlier, granting Andhra Pradesh a financial package equivalent to a special category status -- a practice discontinued in April 2015, may be tricky because it could lead to similar demands from more states.

In 2015, the 14th Finance Commission, chaired by former central bank governor YV Reddy, discontinued the distinction between special category and other states. Instead, the Commission increased the quantum of tax devolution to states by 10 percentage points to 42 percent.

With the sharp increase in states'share of tax proceeds, conferring special category status to some states was deemed unjustified, except for the Northeast and hilly regions on certain parameters.