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Column: Hyderabad tilt in AP split

Apr 28 2014, 05:42 IST
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SummaryBoth regions will benefit in the long run but face considerable uncertainities in the immediate future

population data in determining their transfers. But Hyderabad has been the recipient of large population through migration from within the districts of Andhra Pradesh as well as from other states. This will render the use of 1971 data completely irrational. Furthermore, although physically Hyderabad has been allocated to Telangana, for the period for which, it will serve as a common capital, residents of both the new Andhra Pradesh and Telangana will reside here. Unless the population ratio is determined after bifurcating the citizens of the two successor states living in

Hyderabad, the use of the population ratio as defined in the Act will lead to biased results in favour of Telangana.

Own tax revenues of the two states will also depend on the division of the tax base between the two states. Hyderabad as the IT and business hub contributes a significant share, according to some estimates, more than 45% to Andhra Pradesh’s own tax revenues. This may be paid by citizens and companies of both states. How will this amount get divided? Of the 44 state-level public enterprises, the headquarters of all but 4 are located in Hyderabad. The headquarters of many private companies are also located in Hyderabad. Many of them may be paying a significant share of their state taxes in Hyderabad although their activities may be differentially spread across the two states. Some trade of goods and services that is presently intra-state within the existing Andhra Pradesh will become cross-state between Andhra Pradesh and Telangana becoming subject to the levy of Central Sales Tax. But this would not be possible within Hyderabad.

Non-tax revenues, following mainly the principle of location, will also be differentially affected. The division of mineral resources including coal and oil and gas will affect royalties. Offshore resources will go to Andhra Pradesh and land-based mineral resources will benefit Telangana relatively more.

The pattern of expenditure will also be quite different for the two states. Telangana will have to devote more resources on developmental expenditures, including on education and health, to uplift the economic developments of districts other than Hyderabad. The focus of Andhra Pradesh will be on selecting the location of the new capital city, which will unleash a massive flow of resources, both private and public, to cater to the new infrastructure and construction-related activities. Property prices including land prices are likely to shoot up in this area. Salary and pension

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