Working Paper No. 44
June, 2002
THE TELANGANA SURPLUSES: A CASE STUDY
B.P.R. VITHAL
CENTRE FOR ECONOMIC AND SOCIAL STUDIES
Begumpet,
Prefatory Note
Telengana Surpluses can be loosely defined as the States' Own Revenues derived within the Telengana Region which had not been utilised exclusively for the development of that region. The method of calculating such surpluses, and the manner, in which they were utilised became issues in the regional politics of the State, from time to time. However, quite apart from this, this entire issue provides an excellent case study in the inter-play between budgeting and politics and, more specifically, in legislative control over financial administration. The fact, that the controversies may have arisen out of regional politics, does not detract from the importance of the issues for financial administration in general. The basic issue arises out of a political agreement, gets complicated by a political agitation which raises it to the level of a Center-State issue, and is finally resolved by a Constitutional amendment. A case study with all these ingredients would be rare to find.
The Telengana Regional Committee was a Committee of the Andhra Pradesh Legislative Assembly. During the years it was in existence, it was exercising effective and meaningful control over public expenditure, in respect of items that fell within its purview by virtue of the statutory provisions. The issues raised by the Committee may have had a political background, but the reports produced by the Development and Finance Sub Committee and the Regional Committee were professional in their analysis and presentation. The issues were similar to those, which a Public Accounts Committee or an Estimates Committee would raise. The inter-action between the Regional Committee and representatives of the State Government involved, essentially, legislative control over the executive, even if, in this case, the control was restricted to Telengana issues. The case study should, therefore, have wider interest and relevance. I was Planning Secretary for sixteen years and Finance Secretary for eight years. By coincidence, I am the only Planning or Finance Secretary of Andhra Pradesh, before 1982, who is now alive. This is another reason why I thought I should do this case study, at least for historical and academic interest
During the period covered by this study, I had the privilege of enjoying the confidence of the two successive Chief Ministers concerned, and of the Chairman and the important members of the Regional Committee. I have, however, refrained from using any information that may have come to my knowledge, by virtue of the confidences I so enjoyed. I have used in this study, only published material, government orders, press notes, and my own notes of that time (Working Paper No. 44).
May 28, 2002. B.P.R. Vithal.
Acknowledgment
I showed a draft of this study to Prof. Ch. Hanumantha Rao, Chairman, CESS and Prof. K. Jayashanker, former Vice-Chancellor. Both of them gave valuable comments in the light of which I have made some changes.
* * * * *
THE TELANGANA SURPLUSES: A CASE STUDY
The Regional Committee: Formation and Functions
The initial 1958 Order
1. The States’ Reorganization Commission (SRC) 1955, while recommending the formation of separate Telangana, had given, as one of the reasons for this recommendation, the apprehension of the people of Telangana that the region would suffer financially if formed part of a Visalandhra. The Commission noted that “the existing
2. At the time of the formation of Andhra Pradesh, there was a ‘Gentlemen’s Agreement’ in February 1956 between the leaders of Andhra and Telangana which addressed the fears of the Telangana leaders and committed itself to certain assurances for Telangana. The signatories to that agreement were Sri B. Gopal Reddy, Sri N. Sanjeeva Reddy, Sri A. Sathyanarayana Raju and Sri G. Latchanna for Andhra and Dr. B. Ramakrishna Rao, Sri K.V. Ranga Reddy, Dr. M. Channa Reddy and Sri J.V. Narsing Rao from Telangana.
3. The terms of this Agreement, spelt out in a paper laid on the Table of the House in Parliament, provided among other matters, for a Regional Standing Committee of the State Assembly for Telangana Region consisting of the Members of the Assembly belonging to that region including the Ministers from that region but not including the Chief Minister. Legislation relating to specified matters was to be referred to the Regional Committee. In respect of such matters the Committee could also propose to the State Government legislation or any question of general policy “not involving any financial commitments.” The matters that the Committee could deal with were indicated as
(1) Development and Economic Planning within the framework of the general development plans and policies formulated by the State Legislature.
(2) Local Self-Government, that is to say, the Constitutional powers of Municipal Corporations, Improvement Trusts, District Boards and other district authorities for the purposes of local self-government or village administration.
(3) Public Health and Sanitation, local hospitals and dispensaries.
(4) Primary and Secondary Education.
(5) Regulation of admissions to the educational institutions in the Telangana region.
(6) Prohibition.
(7)
(8) Cottage and Small Scale Industries.
(9) Agriculture, Cooperative Societies, Markets and Fairs.
4. Such a Committee was constituted under the Andhra Pradesh Regional Committee Order 1958 on 01-02-1958 {we shall refer to this Committee hereafter as the Telangana Regional Committee (TRC)}.
Expansion of the scope and functions of the Regional Committee –
The 1970 Order
1. From 1968 there was an agitation in the Telangana region which came to be known as the Telangana agitation. Consequent on this, the Prime Minister made a statement in the Lok Sabha on April 11, 1969 dealing with various issues which had resulted in this agitation. Since there had been a lack of understanding between the Government and the TRC, regarding what had been called “Telangana Surpluses”, it was announced in this statement that the Central Government would appoint a Committee with a serving or retired Supreme Court Judge, “to go into the varying estimates and representations and determining the surplus relatable to Telengana which was expected to have been spent on the development of the Telengana region.” Accordingly, a Committee was appointed with Justice Vashista Bhargava, a Judge of the Supreme Court, as Chairman.
2. On 21st August, 1969, the TRC adopted the recommendations made by a Committee on a motion moved by Sri J. Vengal Rao (then Minister for Home). In this motion the Committee suggested, among other matters, that the Presidential Order 1958 regarding the Regional Committee should be suitably amended to bring in matters related to principles and methods of recruitment for securing equitable and adequate opportunities for employment in Government and quasi-Government services for the people of the Telangana region; matters relating to equation of posts and integration of services of the employees of the former Governments of Andhra and Hyderabad; the Annual Financial Statement insofar as it relates to receipts and expenditure for Telangana region and development and economic planning within the approved allocations for the Telangana region.
3. In order to allay the fears of the people of Telangana the Government of India announced on 18th February, 1970 a “series of measures intended to ensure the development of Telangana.” These included a widening of the subjects which the Telangana Regional Committee (TRC) could discuss and of the powers of this Committee in respect thereof. Accordingly a Presidential Order was issued on 7th March 1970 under Article 371 amending the original order of 1958.
4. The following subjects were added to the First Schedule of the original order specifying the subjects falling within the purview of the TRC:
“Methods of recruitment and the principles to be followed in making appointments to subordinate services and posts (that is to say, services and posts appointments to which are not notified in the Official Gazette but including any service of Tahsildars) under the State Government in Telangana region.”
“Securing provision of adequate employment opportunities to the people of the Telangana region in the State Government, Quasi Government institutions, statutory authorities and corporate bodies in the Telangana region.”
5. The list of subjects falling within the purview of the Regional Committee was enlarged to also include University education in addition to the existing primary and secondary education and medium and heavy industry in addition to the existing small scale industries.
6. The following item was substituted under item (9) of the first schedule i.e. the matters insofar as they relate to the Telangana which come within the purview of the Regional Committee. “Development and economic planning within the plan allocation for the Telangana region as formulated by the State Legislature.”
7. The Order also provided that “in the annual financial statement details regarding the receipts and expenditure in relation to the Telangana region and rest of the State (RoS) shall be shown in separate columns for facility of reference and consideration by the Regional Committee.”
8. The Order also modified the earlier rule which had restricted the Regional Committee to matters not involving any financial commitment by introducing the words “is in conformity with the overall financial arrangements contemplated in the annual budget or in the Five Year Plan pertaining to the Telangana region.”
9. The Government was to furnish periodic progress reports to the TRC which would submit its views to the Assembly. It was also provided that if the State Government was unable to accept any recommendation of the Regional Committee, the Chief Minister would first endeavour to arrive at an agreement by discussion with the Chairman of the Regional Committee and the matter would then be referred to the Governor if no such agreement was found possible. The Governor was to make an annual Report to the President so as to keep the Central Government informed about the working of the Regional Committee.
II. Allocation of finances between Telangana
and the Rest of the State (RoS)
1. The Gentlemen’s Agreement stated that “the expenditure of the Central and General Administration of the State should be borne proportionately by the two regions and the balance of income from Telangana should be reserved for expenditure on the development of Telangana area.”
2. Following this, the Finance Department of the State Government submitted, as early as 12th February 1957, certain proposals for the approval of the Cabinet in connection with the first budget after the formation of Andhra Pradesh. The department pointed out that: “The terms ‘Central and General Administration’ and ‘proportionately’ have not been defined anywhere. The intention appears to be that the expenditure on establishment and services which are not intended exclusively for any one region, but have been constituted for rendering common services to both the regions should be shared by the two regions in an equitable manner. It would be difficult for the administrative departments as well as the Accountant General to maintain separate sets of accounts, income and expenditure of Andhra and Telangana regions of Andhra Pradesh.” As a practical measure, therefore, the Finance Department suggested certain principles to be provisionally adopted in framing the estimates for 1957-58. Briefly, these principles were that –
(1) Expenditure on certain State officers, heads of departments, etc. (which were specified) to be divided between Andhra and Telangana in the ration of two-third and one-third [2:1] “which roughly conforms to the ratio of populations of the two areas.” (This is the first occasion on which the one-third, two-third ration is mentioned).
(2) Interest on public debt as on 31st October, 1956 to be charged to each region according to its liability on that date. Interest on future public loans and future loans from the Central Government to be charged in the proportion of capital outlay in each region in a particular year. Interest on ways and means loans from the Reserve Bank of
3. In the budget speech of 1957-58, late Sri Kala Venkata Rao stated that the principles agreed to in the Gentlemen’s Agreement had been “kept in view in framing the budget estimates for 1957-58 and particularly in the allocation of funds for the Second Five Year Plan.” This was the first occasion when the ratio of one-third and two-third adapted by the Government for allocation of ‘Common Expenditure’ was extended to Plan allocations.
4. The TRC started examining under item (1) of its terms, the Non-Plan and Plan expenditures in Telangana with reference to the Budget. Having done so, it started arriving at what should be considered “the balance of income from Telangana” after bearing proportionately the common expenditure on “Central and General Administration.” This fell within their purview because they were only showing what they considered to be shortfalls in the provision for the Telangana region, within the existing Plan and Non-Plan budgets. They were not proposing new financial commitments.
5. In the 1958-59 budget speech Dr. Gopal Reddy stated that, “I may take this opportunity for assuring my friends in Telangana that every rupee collected in Telangana area will be accounted for separately and the fear that Telangana money will be diverted to the development of Andhra is not well founded and whatever assurances were given in this regard, will be remembered and implemented.” Yet in their 23rd supplementary on finance, in September 1959, the Sub-Committee on Finance and Development of the TRC [and the TRC] pointed out that there was shortfall in expenditure in Telangana. They went on to comment that, “the main hurdle for the Government providing for non-Plan schemes in Telangana seems to be that the Government is unable to meet the already committed expenditure in Andhra area under non-plan.” When additional taxation was resorted to for this purpose, again the percentage yield was 45.2% in Telangana while it was on 19.3% of existing levels in Andhra, according to the Committee. A decade later the Committee had again to say that, “the only way, in the opinion of this Committee, to find a solution for doing justice to Telangana is that the Government should rationalize the expenditure in Andhra and increase its financial resources.” (7th March 1969)
6. Incidentally, forty years later, this advice still holds good for
7. In 1959 there was an “agreement” between the Chairman of the Regional Committee and the Government of Andhra Pradesh, “laying down the principles for allocation of revenue receipts and expenditures between the two regions.” (see para V.5 below where this was challenged before the Bhargava Committee in 1969). The basic principles agreed to were that –
(1) The receipts arising from and expenditures incurred within a region will be allocated to that region.
(2) Receipts and expenditures of a common nature pertaining to
(3) Central devolutions and non-plan grants will be allocated as above i.e. 2:1.
(4) Plan grants identifiable with plan schemes will be allocated to the region where the Scheme is located.
8. In sum, the broad issues of contention and the tenor of the debate was set in 1959 itself. The stridency that came, in 1969, in discussing these issues was because the Mulki rules agitation changed the entire atmosphere. Nothing new, except the cumulative effect of shortfalls, had happened since 1959.
Defining and Calculating Telangana Surplus
1. Initially, not many issues arose out of the manner of allocating Government expenditure on ‘State-wide’ schemes between the two regions. The only major issues were regarding Electricity Board and the Road Transport Corporation (RTC) which we discuss in detail later.
2. Assuming certain regional allocations of revenues and expenditures, how do we arrive at, what may be called, the “balance of income from Telangana.” The dispute between the TRC and the Government started with this issue. In budgetary terms this would, at a minimum, have to be equated with a Revenue Surplus. Table I will help understand the issues involved. In this table the revenue surplus during the Third Plan period was Rs. 24. 18 crores, according to Government’s own admission. But, there was a Capital Deficit of Rs. 13.90 crores. Therefore, if this were a separate budget for Telangana the overall Surplus (which was being equated with the ‘balance of income from Telangana’ in the Gentlemen’s Agreement) would be Revenue Surplus (24.18) – Capital Deficit (13.90) = 10.28 crores. The Finance Department argued that this was the Telangana Surplus. The TRC rightly contended that if Andhra was allowed a Capital deficit (–44.20 crores) over and above a Revenue deficit (–8.60 crores) why should not Telangana’s Capital deficit be considered separately from and without affecting its Revenue Surplus. Once the Capital deficit is considered without reference to the Revenue position the question would arise as to what it should have been for Telangana and not necessarily what it actually was. (emphasis ours)
3. When this issue was first discussed by the TRC in 1959 in their 23rd Report on Finance they took the view that the Surplus should be “The unspent amount of Telangana” plus “half the overspent amount of Andhra area.” The unspent amount of Telangana can easily be taken to be the Revenue Surplus. But what will be considered the “overspent amount of Andhra”? In budget terms this would be the Revenue deficit plus the Capital deficit of the Andhra region. But the TRC were content to interpret this to mean that Telangana should have got 1/3rd of the total Capital expenditure in the State. If the actual expenditure was less than this, then the difference should be added to the Revenue Surplus due to Telangana. In Table I, 1/3rd of the total Capital expenditure is Rs. 163.36 crores. The actual Capital expenditure in Telangana was Rs. 157 crores. Therefore, the shortfall was Rs. 163.36 – 157 = Rs. 6.36 crores. The Telangana Surplus would, therefore, be Revenue Surplus of Rs. 24.18 crores + Capital expenditure deficit of Rs. 6.36 crores = Rs. 30.54 crores. (emphases ours)
4. The Government’s argument that the Capital deficit should be subtracted from the Revenue Surplus was unfair because it was being done for Telangana region only, while the Andhra region had a deficit on both accounts.
5. Stung by the Government’s unfair argument, the TRC also raised extreme arguments to counter this. The misunderstanding caused by this simple principle not being fairly or logically settled by Government led to the TRC opening the accounts themselves and questioning the manner in which common items of expenditure were being allocated between the Andhra and Telangana regions.
6. In the 1959 report referred to above two other items were mentioned as constituting the surplus of Telangana – (1) Amount available in the Industrial Trust Fund; (2) Securities of the former Hyderabad Government. An assurance was recorded in the meeting of 19th January 1969 (referred to below) “That the Industrial Trust Fund, which is being operated exclusively for Telangana region will continue to be so utilized.” In regard to Hyderabad Securities, the Finance Minister had stated in his Budget Speech for 1959-60 that –
“Telangana Securities: The gilt-edged and other securities which accrued to Andhra Pradesh as Telangana’s share in the investments of
7. The broad issue of how the Telangana Surplus was to be calculated on the basis of the Revenue Surplus and Capital Expenditure, was finally settled in a meeting held on 08-02-1968 by the C.M., Sri Brahmananda Reddy with Sri J. Chokka Rao, Chairman, TRC, Sri K. Rajamallu, Vice Chairman, and Sri Vasudeva Rao, Member of the Sub Committee on development of the TRC.
8. At this meeting the Chief Minister agreed to the surpluses for the Third Plan period being calculated on the basis urged all along by the TRC i.e. as follows:
| | | (Rs. in Crores) |
| 1. | Revenue Surplus of Telangana area | 24.18 |
| 2. | Shortfall of Capital Expenditure in the Telangana area compared to one-third of the total capital expenditure in the State | 6.56 |
| TOTAL | 30.54 | |
9. The decision was communicated to the Chairman, TRC through a letter of 17-06-1968 from Finance Secretary. The Chief Minister also agreed that on this basis the balance of the Second Plan surpluses of Rs. 3.70 crores would be provided – Rs. 2.80 crores in 1968-69 and about Rs. 90 lakhs thereafter. Therefore, in all about Rs. 34.24 crores (Rs. 30.54 + 3.70 crores) would have to be provided for the Telangana region over and above its one-third share. The Chief Minister stated that this should be fitted into the Fourth Plan; that is, the amount finally agreed would be first set apart in the Plan and the balance plan outlay would then be provided in the ratio of 1/3 : 2/3 (i.e. 1: 2).
Table - I
| (Rs. in Crores) | |||
| Third Plan period | Andhra | Telangana | Total |
| Receipts on Revenue Account | 388.30 | 241.19 | 629.49 |
| Expenditure on Revenue Account | 396.90 | 217.01 | 613.91 |
| Revenue Account Surplus (+) | (-) 8.60 | (+) 24.18 | (+) 15.58 |
| Receipts on Capital Account | 288.89 | 143.10 | 431.99 |
| Expenditure on Capital Account | 333.09 | 157.00 | 490.09 |
| Surplus (+) or Deficit (–) | (-) 44.20 | (-) 13.90 | (-) 58.10 |
| Overall Surplus (+) or Deficit (–) | (-) 52.80 | (+) 10.28 | |
10. The issue of Telangana Surpluses would have been, more or less, settled by this decision. But, an agitation started in Telangana in 1968, primarily relating to issues arising out of application of the Mulki Rules and service grievances of Telangana employees. The situation was exacerbated by the Supreme Court striking down the Public Employment (Requirement as to Residence) Act of 1957, in January 1969. (emphasis ours)
IV. The 1969 All-Party meeting: Appointment of an officer of the CAG
1. On 19th January, 1969, an all party meeting was held by the Chief Minister, K. Brahmananda Reddy to discuss all these issues. At this meeting an accord on Telangana Safeguards was arrived at. This accord also contained the principles on which the Telangana surplus funds would be determined. It was agreed that:
(a) the existing method of allocation of expenditure and receipts to either region will continue;
(b) the Telangana Surpluses for each year will be computed by adding to the net revenue surplus of Telangana region of that year, the difference between one-third of the total capital expenditure of the State in that year and the actual capital expenditure in the Telangana region in that year;
(c) So far as statutory or other Boards, Corporations etc. functioning on a State-wide basis and financed by State Government are concerned, they will, for the purposes of computing Telangana Surpluses, be treated as if they were State-wide Government department and as if their receipts and expenditures were booked in Government accounts. In the case of the State Electricity Board, however, the expenditure on power generation and high transmission lines only will be apportioned between two regions in the manner indicated above. Expenditure on distribution lines and rural electrification will be booked to each region as per actuals.
(d) The Industrial Trust Fund which is being operated exclusively for Telangana region will continue to be so utilized.
2. As we have seen above the principles at (a) and (b) above had already been agreed to by the Chief Minister almost a year earlier in February 1968. Item (c) actually created a new problem which we will discuss later. However, by this time the mutual suspicion was such that “to avoid any controversy in this regard, the Comptroller and Auditor General (CAG) of
3. The TRC wrote to the Finance Secretary on 04-03-1969 giving the points wherein they felt there was a difference between the clarifications given by the Government to Sri Lalit and what the TRC contended was the existing method being followed. The report of Sri Lalit was discussed by the TRC on 18-03-1969 and subsequently their Ad-hoc Committee on Planning on 1st April 1969. The observations of the Planning Committee were adopted by the TRC on 14-04-1969. When the report submitted by Sri K. Lalith was discussed by the Telangana Regional Committee (TRC) on 14th April, 1969, the Committee expressed the view that “the question of corporate bodies has been brought in for the first time only during the all party accord of 19th January, 1969 and prior to that neither the Government nor the Regional Committee considered it necessary to take their accounts into consideration for arriving at the quantum of Telangana Surpluses.” The TRC pointed out that the clause in the original Gentlemen’s Agreement referred only to expenditure of the new State on Central and General Administration and it “never envisaged to take into account the accounts of corporate bodies for the purpose of working out Telangana Surpluses… The Government all of a sudden deemed it necessary to bring in all the corporate bodies into this purview for the first time, at the time of the all party accord on 19-01-1969.” The Committee went on to note that Sri Lalith himself had stated in his report that the corporate bodies did not maintain accounts on a regional basis. The view of the TRC was that its main object in examining the accounts of the corporate bodies was “only to satisfy that justice has been done to this region but not to work out the surpluses of Telangana. This item should not, therefore, be deducted from the revenue surpluses as a matter of principle.”
4. However, the TRC itself pointed out that it had taken a different stand earlier in regard to the Road Transport Corporation. In case of this Corporation, the TRC had noted that the activities of the RTC were originally confined to the Telangana area only as it was a Corporation of Hyderabad State which came to the new State of
5. At this late stage an old settled issue was raised again before Sri Lalith. The Government informed this officer that they had decided that the Telangana Surplus should be computed by adding to the net revenue surplus of Telangana, half the revenue deficit of the Andhra region or, if in any year, there was a revenue deficit in Telangana, then the difference between that actual deficit and 1/3rd of the total revenue deficit of the State would be deemed the Telangana Surplus. Thus, for the first time the method that was being applied to Capital Expenditure was sought to be applied to the revenue account also. The principle here was that if there is an overall deficit for the State, why should 1/3rd of it be attributed to Telangana. A similar contention was once raised by Dr. Ashok Mitra, then Finance Minister,
6. The Government then clarified on 06-03-1969 that what was meant by Revenue deficit was that part of the deficit to which Capital receipts, like Government of India loans, had been diverted to fill the revenue gap of Andhra region and such diverted Capital receipts should be added to the calculation of Telangana Surpluses. There was some logic to this later stand of the Government. Capital expenditure was being divided 1/3:2/3 (1: 2) between Telangana and Andhra and shortfall of Capital Expenditure in Telangana was to be added to arrive at Telangana Surpluses. If a Capital receipt was diverted, to fill the revenue gap of Andhra, then that Capital receipt should be added in the 1/3: 2/3 (1: 2) breakup. Further, in the initial decision of the Government referred to earlier, under Common Expenditure ways and means loans from the RBI were also to be charged 1/3rd: 2/3rd. Unfortunately, due to the way in which this clarification was given, it appeared as a narrowing of the original decision.
7. As we explained earlier the TRC was counting the Telangana Revenue Surplus plus 1/3rd of the total Capital Expenditure of the State as the Telangana Surplus. Now with this new inclusion of the Revenue deficit of the Andhra region, which the Government itself had introduced, the TRC took the stand that, “Even from 1959 itself the Regional Committee was insisting that half of the over-spent amount in Andhra revenue account should be added to the Telangana Surplus.” (emphasis added). The word ‘revenue’ here is the new concept.
8. The TRC went on to mention that the clarification of the Government re: the Revenue deficit was given on 06-03-1969 when the Government itself had asked Mr. Lalith to give the report by 05-03-1969 and he “had already left Hyderabad City” by 06-03-1969. Quite unnecessarily a new issue had been raised and a new controversy created. This was one more example of the lack of confidence between the TRC and the Government in general and the Finance Department in particular at that time. Thus the appointment of an officer of the CAG had not also removed the reservations of the TRC.
9. The net Telangana Surpluses, calculated by Sri Lalith, after taking into account the Capital expenditures in the two regions, for the period 01-11-1956 to 31-03-1968 came to Rs. 34.10 crores.
10. Sri Lalith had reservations about two issues. In February 1969 the Government had clarified to him that “the term Capital Expenditure used in the 1969 Accord should be deemed to include Loans and Advances.” Sri Lalith did not agree with this clarification (rightly in my view - BPRV). If loans and advances are excluded, the surplus would go up by Rs. 3.62 crores (para 8 of the report). The other issue concerned Sales Tax receipts booked at
11. This surplus was worked out for the period 1956-1968. The amount already conceded by the Chief Minister, through the letter of Finance Secretary of June 1968 (para III.9) was Rs. 34.24 crores. But this was till the end of the Third Plan period i.e. 31-03-1966. Sri Lalith’s figures for 1966-67 were Rs. 3.9 crores and for 1967-68 were
Rs. 2.29 crores. His original figure was Rs. 34.10 crores for the entire period. If we take Rs. 42.49 crores and subtract surpluses of 1966-68, we get Rs. 36.30 crores. This shows that there really was not much difference between the two calculations. (emphasis ours)
V. The Bhargava Committee
1. On April 11, 1969, the Prime Minister made a statement in the Lok Sabha in regard to Telangana, after she had discussions with various leaders concerned. The statement states that: “The overall aim is to ensure that the pace of development and the expansion of employment opportunities in Telangana is accelerated, and conditions are created for the balanced development of all parts of Andhra Pradesh.” It was announced that in pursuance of this aim a high powered Committee would be appointed with a retired or serving Supreme Court Judge as Chairman and an eminent economist with knowledge of State finances, together with a senior representative of the Comptroller and Auditor General as Members. The Committee was to go into the varying estimates and representations and determine the surplus relatable to Telangana which was expected to have been spent on the development of the Telangana region. The Committee was to report to the Union Government by the end of May 1969.
2. As mentioned at para III.10 above the issues which were responsible for the intensity of the agitation related more to the Mulki Rules and service grievances. On these issues the statement only said that, “The possibility of providing for appropriate Constitutional safeguards in the matter of public employment in favour of people belonging to the Telangana region will be examined by the Government of India in consultation with a Committee of Jurists.”
3. In accordance with the above Statement a Committee was appointed on 22nd April 1969 with Sri Justice Vasishta Bhargava, Judge of the Supreme Court as Chairman and Prof. M.V. Mathur, Director of Asian Institute of Educational Planning and Administration, Sri Hari Bhushan Bhan, Additional Deputy Comptroller and Auditor General as members and Sri T.N. Krishnasami as Secretary (Bhargava Committee). The Committee was asked to report by 31 May 1969 but this time was extended up to 31 October 1969. The Committee issued a press note calling for representations from interested parties and interviewed twenty persons from the Andhra and Telangana regions. Besides these they heard Sri Tenneti Viswanatham, M.P., and Prof. Gautam Madhur, Head of the Economics Department of the
4. The terms of reference of the Committee said that, “The Committee shall take into account the agreements reached between the representatives of Andhra and Telangana of the State of
1. ‘Gentlemen’s Agreement’ of 1956 (para I.3)
2. a “so-called Agreement” between the Chairman of the Regional Committee and the Government of A.P. arrived at in 1959 (para II.7).
3. The ‘Agreement’ dated 19 January 1969 described as an all-party agreement (vide paras IV.1 above).
5. All these three were challenged before the Committee by the representatives of Andhra region. They raised an issue regarding the Gentlemen’s Agreement itself. “This Agreement was arrived at a meeting held on the 20th February, 1956 at the Hyderabad Guest House,
6. As regards the second document, viz., the “agreement” of 1959, the Committee came to the conclusion that “these principles embodied in the document of 1959 cannot be given the status of an agreement.” However, “the principles laid down appear to be, by and large, the correct principles… [However,] in some details and in respect of some items, the principles applied may not be strictly fair and consequently, where we intend to depart from those principles we shall indicate … the reasons in brief” (page 4 of the report).
7. The third “agreement” of 19 January, 1969 “was repudiated by the representatives of both the sides, so that we are not inclined to give that “agreement” the status of a binding agreement.” However, the Committee did keep “this agreement in view” (page 5).
8. Therefore, the Committee was working more or less on the same basis as Sri Kumar Lalith had done. But, the Chairman of the Regional Committee had urged that the Committee report should not be based on the figures furnished by Government to Sri Kumar Lalith since “they were not satisfied that the correct figures had been made available to him.” The Committee recorded that, “We were also not quite satisfied that the figures which Sri Kumar Lalith [was supplied] were correct.” Therefore, the Committee obtained fresh figures from the Government. Nevertheless, as we shall see later, the entire exercise did not yield any substantially different result. (emphasis ours)
9. To give a flavour of the kinds of issues that were being raised on behalf of Telangana and Andhra and the manner in which the Bhargava Committee dealt with them, we may briefly describe the issue concerning allocation of expenditure on the Nagarjuna Sagar Dam between the two regions. The total cost was, at that time, expected to exceed Rs. 150 crores. In the first phase 177 TMC was to be utilized in the Andhra region and 87 TMC in the Telangana region. In addition 30-45 TMC were going to be available for the Krishna Delta. The representatives of the Andhra Region and the PWD and Finance Secretaries of Government urged that this should not be into account because the Delta would in any case have received water through the river channel. After much discussion (which we do not quote here) the Committee came to the conclusion that 16 TMC which the Krishna Delta used to get from the Tungabhadra Reservoir will now no longer be necessary because Nagarjuna Sagar would take care of this. This 16 TMC saved in Tungabhadra benefits entirely the Andhra region. Therefore, this 16 TMC was added to Andhra’s share of 177 giving [it] 193 TMC. Therefore, the investment made in the Nagarjuna Sagar Dam would be allocated between Andhra and Telangana in the proportion of 193 to 87 (page 20-21 of the report).
10. The manner in which the Committee dealt with the allocation of expenditure on the Electricity Board created fresh problems. In 1967 the Government had taken the stand that generation schemes should be charged on the basis of regional allocation “as the flow of power is from Andhra to Telangana.” The presumption here was that the new schemes at Kothagudem were needed to meet the shortage in Telangana. It was then stand of the TRC that generation should be charged 1/3: 2/3 (1: 2) as a common scheme and distribution and rural electricity should be charged regionally by location. This was endorsed in the January 1969 all Party meeting referred to above.
11. The Bhargava Committee reversed this position by holding that “it is proper to treat the activities of the Electricity Board as separate ones depending on whether a particular source of supply is serving one region or the other.” They made this recommendation on three grounds:
(1) “In the case of electricity, we do not think that the principle (of 2: 1 allocation) could be applied because the consumption of electricity and the benefits derived from electricity supplied could not bear any relation to the population;”
(2) Allocation of capital expenditure on the basis of existing proportion of energy consumption would “appear very anomalous” when that proportion alters “very materially.”
(3) The Chairman and officers of the Electricity Board had informed them that, “various sources of supply can be separately identified as intended to serve separate areas with a few exceptions where one single source may serve more than one area.”
12. The most important of these reasons was really the third one, since this provided the rationale for the entire recommendation. This was based on the fact that, according to the Committee, “the information elicited from the Chairman and the officers of the Electricity Board is that various sources of supply can be separately identified as intended to serve separate areas with a few exceptions where one single source may serve more than one area.”
13. However, the Electricity Board itself subsequently stated that “both the regions have been served by an integrated grid and, therefore, all allocations are purely notional and depend for accuracy on the validity of the assumptions made.” As Sri Tata Rao, Chairman of the Electricity Board, put it in a subsequent note, “even if mathematically a relationship could be established between the power generated and the electricity consumed in a given region, from this it could not be concluded that the power generated in a particular station was supplied only to that region. By a coincidence, all the major thermal stations in the State are located in the Telangana region while all the major hydel stations are in the Andhra region. The grid can be operated to the advantage of the entire State only by a proper hydel thermal combination. Even in arriving at the rate to be charged for power, it is the total cost that is taken and not the cost of thermal generation and hydel generation separately.” Under the circumstances, it was difficult to say that the power from any particular station was being supplied to any one region and, therefore, Sri Tata Rao felt that the reasoning of the Bhargava Committee was “open to question.”
14. In 1971-72 when the Development Sub-Committee of the TRC had to consider the proposal regarding Kothagudem Thermal Project Third phase, they followed Bhargava Committee’s logic and recommendation and stated that Telangana was already surplus in power and as such Telangana funds should not be spent on this project. They had no objection for taking up the project provided Telangana funds were not involved. The Sub-Committee wanted that “the funds proposed for spending on Kothagudem third phase on behalf of Telangana should be wholly diverted to Rural Electrification in Telangana” as the allocation for Rural Electrification in Telangana was only a “meager amount of Rs. 86 lakhs” out of the total amount of Rs. 12.16 crores available for Power under Telangana share. The Electricity Board contended that if the position with regard to the Power sector was viewed separately for the Telangana region there was a surplus of power available in that region and that, therefore, higher priority should be given for distribution and rural electrification rather than for generation. The generating capacity was needed considering the State as a whole. The Board pointed out that this anomalous position had arisen because of the Bhargava Committee’s recommendation. The Board also showed that, if in such a situation it was argued that the region should, even if the power was not immediately required in that region, go in for the generation project as a kind of investment on which it can get returns by sale of power, there was another recommendation of the Bhargava Committee which would go counter to this argument. In another part of the same recommendation, the Bhargava Committee had stated that the revenue income to the Electricity Board by the sale of power was allocable to the region in which the supply was made and became due to the Electricity Board. By this, the income was being allocated to the region in which the power was finally sold to the consumer and not to the region where it was initially generated. This meant that while the investment required for generation was being made by one region, the income derived from the sale of such power was being allocated to another region. The Board, therefore, concluded that what the TRC was doing was to pursue the reasoning of the Bhargava Committee to “its logical conclusion to arrive at a kind of reductio ad absurdum.”
15. Since the recommendations of the Bhargava Committee had been accepted in toto, there would ordinarily have been no ground for re-examining this particular recommendation merely because the premises on which it had been arrived at can be shown to be incorrect. The immediate problem, however, was as to how to deal with the recommendations made by the Regional Committee based on this very logic. The Board conceded that the recommendation made by the Regional Committee that expenditure on Power Generation projects and High Tension lines should be allocated on the basis of 2: 1 was reasonable.
16. Therefore, as we shall see later, even the Bhargava Committee’s recommendations regarding allocation of “Common expenditure” between the two regions had to be modified. This was done by Government in consultation with the TRC when it became necessary to show the entire break-up between the regions in the Budget. Had such consultations gone on in the earlier period both Sri Lalith’s report and Bhargava Committee’s report would have been unnecessary.
17. The unspent surplus worked out by the Bhargava Committee came to Rs. 28.34 crores. This compares with Rs. 34.09 crores worked out by Sri Kumar Lalith (IV.10) and Rs. 34.24 crores agreed to by the Chief Minister in February and June 1968 (III.9). In comparing the figure worked out by Sri Kumar Lalith and the Bhargava Committee we have to keep in mind that the latter has a minus entry of Rs. 11.48 crores for 1966-68 because of excess expenditure in Telangana in those years. They said, “in the last two years 1966-67 and 1967-68 the development expenditure in Telangana was so much higher than its due proportion that a sum exceeding Rs. 11 crores out of the previously unspent surplus was utilized” (pages 28-29 of the report).
| (Rs. in crores) | |||
| | 1956-1966 | 1966-1968 | 1956-1968 |
| Sri Kumar Lalith | 27.90 | 6.19 | 34.09 |
| Bhargava Committee | 39.83 | (-) 11.49 | 28.34 |
18. The Bhargava Committee took note of a contention that because of the delay in utilization of Telangana’s revenues and the rise in prices meanwhile the same amount of money would now result in lesser development. They noted the suggestion of the Head of the Economics Department, Osmania University, that, “ it would be fair to revalue the amount of unspent surplus of each year in proportion to the rise in price index of that year and the price index prevailing on 31 March 1968.” They agreed that “there was considerable force” in this point. But they also took note of the point raised earlier that the original Gentlemen's Agreement had a time limit of ten years. Therefore, they thought fit to leave the figure worked out as it is. However, in a Communique issued on 18-02-1970 accepting the Bhargava Committee’s report and its finding, the Ministry of Home Affairs, Government of India added that “they have taken note of the fact that the Surplus had accumulated over a period of nearly 10 years. Non-utilisation of the Surplus over a long period has retarded to a certain extent the development of Telangana. Taking this into account Government consider that an additional amount should be made available to Telangana for accelerated development during the Fourth Plan period. Government have accordingly advised the State Government that the total special provision for the development of Telangana from 1st April, 1968 to the end of the Fourth Plan period should be Rs. 45 crores. This will be in addition to the normal share of Telangana in the development expenditure of the State.” Therefore, effectively Telangana got Rs. 45 crores as against all the above calculations. (emphasis ours)
19. This Rs. 45 crores was given as additional loan assistance by the Government of India to the State Government. The loan to the extent of the unspent surplus as on March 31, 1968 was to be a charge on the Andhra Region and the balance was to be the liability of the entire State.
VI. Separate entries in the Budget, for Telangana & Rest of the State.
1. Accordingly, the budget for the year 1971-72 gave the break-up of the various items of receipts and expenditure between Telangana and the Rest of the State (RoS). This break-up was done based on the principles of allocation recommended by the Bhargava Committee.
2. In order to consider the Budget in accordance with the amended Assembly rules mentioned above, the Regional Committee appointed a Sub-Committee which gave four reports and these were considered by the main committee. In these reports, a number of issues were raised in regard to the manner in which 1971-72 budget had been divided between Telangana and the rest of the State. The most basic objection raised was that the annual financial statement as presented did not disclose details of the division between Telangana and the RoS for all the items in the Contingency Fund and the Public Account. The question, therefore, arose whether the term “Annual Financial Statement” includes the Contingency Fund and the Public Account. The Law Department of the State Government gave the opinion that the Annual Financial Statement in which, under the Presidential Order, separate figures for Telangana and RoS had to be given, will include the Public Account of the State also.
3. The Government then referred the matter to the Government of India for their advice. The Government of India advised that there was no need to exhibit the transactions of the Contingency Fund separately as all expenditure initially met from the Contingency Fund was eventually reimbursed to the Fund by supplementary grants. However, as regards the Public Account they suggested that the State Government should obtain the views of the CAG and place them before the Regional Committee.
4. The CAG made it clear that it was well neigh impossible to divide the Public Account between the two regions of the State. He stated that this had not been done anywhere in
5. The major heads of Public Debt and Loans and Advances had not been split up in the 1971-72 budget because Bhargava Committee had recommended that these should be taken as composite for the State as a whole. The earlier practice, however, was to allocate these heads also on the basis of the actuals in each region. It was, therefore, suggested by the State Government that the old practice could be continued in this regard. In regard to ‘interest’, the Regional Committee took the view that, since the Bhargava Committee had recommended a capital outlay in Telangana of one-third of the total expenditure, this should be taken as a “fair share of Telangana” in the total outlay and the interest should be restricted to this. The Government, however, took the view that interest charges should be in proportion to the capital outlay actually incurred in the Andhra and Telangana regions. They pointed out that the argument of the Regional Committee, that the incidence of interest should be in proportion to the ‘fair share’ of developmental expenditure was not convincing because the developmental expenditure was not restricted to capital expenditure and included Plan revenue expenditure also. The liability for payment of interest, however, arises only out of the debt incurred which is ordinarily utilized for capital expenditure. Further, “developmental expenditure” includes expenditure by autonomous boards like the Electricity Board whose interest payments do not figure in the Government liability for interest. Therefore, the Government argued that the interest liability should be related directly to capital outlay, Plan and non-Plan, in the two regions. However, since historically there was a problem with the actual capital expenditure incurred in each region it was decided that,
1. Interest on Public Debt as on 31-10-1956 would be chargeable to each region according to its liability on that date.
2. Interest on public debt incurred from 01-11-1956 to 31-03-1968 will be allocated in the ratio of 2: 1.
3. After 01-04-1968 the interest would be charged in proportion to the cumulative capital outlay from 01-11-1956 of each region worked out on the above basis plus the actual capital expenditure incurred in each region after that date.
6. The next issue was in regard to “Ways and Means.” Here the Regional Committee contended that one-third should not be shown against Telangana because the revenue deficit had been entirely in the Andhra region. This was conceded for the earlier period. However, after the lifting of prohibition in the Andhra region in 1970-71, it was anticipated that Andhra would also be having “in future a fairly heavy revenue surplus.” Incidentally this shows that the earlier deficit on the Andhra side was due to there being prohibition in this region, while the Telangana surplus was partly at least due to there being no prohibition in that region. To provide for the contingency of their being, hereafter, a revenue surplus in both regions, the following formula was devised for charging the interest on “Ways and Means.”
Regions to be charged:
(1) When Andhra has revenue deficit and Telangana has revenue surplus (Andhra)
(2) When Andhra has a revenue surplus and Telangana has a revenue deficit (Telangana)
(3) When both the regions have a deficit – in the ratio of the revenue deficit
(4) When both the regions have a revenue surplus – in the inverse ratio of revenue surplus in each region.
7. We had earlier discussed in detail the issues arising out of the Electricity Board and Road Transport Corporation. These again figured in the discussion on the Budget for 1971-72. In the case of the Electricity Board it was decided that “generation and transmission may be allocated in the ratio of 2:1 as it is a common grid for the State. Other expenditure may be allocated area-wise.”
In regard to the RTC, the decision was that “all investment incurred from 1-4-1968 will be to the account of Andhra till the proportion of 2:1 is achieved between the two regions. Thereafter the investment will be allocated on the basis of expenditure in each region.
8. COMMON INSTITUTIONS
The common institutions of the State were to be charged to the two regions in the ratio of 2:1. A list of such common institutions had been given in the report of the Bhargava Committee and the Government adopted this list. On a reference to them, the Government of India clarified that this list could not be considered as final “because new institutions may come up and the existing ones may be re-oriented to function for both the areas.” The Government of India, therefore, felt that there should be no harm in reviewing this list from time to time, provided this was done in consultation with the Regional Committee. The Government asked the Secretariat Departments to examine the existing list and recommend whether such common departments located at the headquarters should be treated as common institutions. The Government directed that a list of such institutions should be sent by the administrative departments of the Secretariat to the Regional Committee who will examine this and send a consolidated list to Government. This list would then be examined and finalized by Government.
These various suggestions were implemented in the Budget for 1972-73.
9. It will thus be seen that a procedure was evolved whereby matters relating to the budget could be amicably settled with the Regional Committee. Incidentally this procedure led to greater scrutiny of the budget by the Regional Committee than had hitherto been the practice by any Assembly Committee. This itself had a salutary effect, not merely on the regional allocations but on the entire process of budget making and legislative scrutiny of the Budget. The decisions of Government mentioned above were taken after informal meetings from November 1971 to January 1972 between the then Chief Minister, the Minister of Finance and the Minister, Industries. The Cabinet decisions mostly followed the decisions taken at this meeting. The earlier meeting helped in appreciating the view point of the Regional Committee and later in the Committee accepting the view finally taken on each issue.
VII. PLAN ALLOCATIONS
1. Apart from the question of Telangana Surpluses, there was the question of allocations for Telangana within the Plan. The ratio of 1/3: 2/3 (1:2) that had been adopted for allocating common schemes between Telangana and Andhra was adopted for Plan allocations also. The TRC had, from time to time, contended that in some sectors of development additional allocations for Andhra were being justified on be basis of availability of natural resources, while the same argument was not accepted in other sectors where it would favour Telangana. For instance, in the Fisheries, a greater allocation for Andhra was justified on the grounds that the entire coastline was in that region. A similar argument, however, was not accepted when it came to Minor Irrigation where there was justification for giving greater allocations for Telangana. To this the explanation given by the Government was that it would not be possible to make sector-wise allocations in the ratio of 1/3: 2/3 but that, whatever the sectoral variations may be, it was ensured that the total allocation for Telangana in the Plan was not less than one-third.
2. In a resolution adopted on 21-08-1968 the TRC stated that “the plan allocations between Andhra and Telangana should be made on the basis of the principles on which plan assistance is given by the Government of India to the States.” Central assistance to the States was based 60% on population (they were referring to the Gadgil Formula), 10% on per-capita tax effort and 10% on per-capita income. The TRC pointed out that the population of Telangana, as well as the area, was more than one-third of the State. The revenues of Telangana were pro-rata more than those of the Andhra Region and per-capita income in the Telangana region was lower than in Andhra. They, therefore, contended that on all these considerations, the allocations for Telangana should be more than one-third.
3. On 28th July, 1970, the Committee considered this matter again and stated that “Even today there is a large leeway existing between the two regions in basic sectors like Agriculture, Irrigation, Rural Electrification, Communications, Industries, and Social Services. The Committee, therefore, after taking into consideration the low per-capita income, high per-capita incidence of taxation, regional imbalances, the problems of weaker sections, Scheduled Castes and Scheduled Tribes, the area, the population and continued backwardness, recommends to the State Government that the fair share for Telangana region of the State should not be less than 40% of the Plan allocation of the State. The State Government is, therefore, requested to immediately agree to this recommendation and allocate the Plan amounts on this principle to Telangana area.” The Committee also said that apart from Plan allocations in regard to other items such as Centrally Sponsored Schemes also, sizeable funds should be allocated to the Telangana region over and above this minimum of 40%.
4. The Bhargava Committee in its report, stated that it expected the State Government to ensure, in the “spirit” of the Gentlemen's Agreement, adequate funds to speed up the development of Telangana. During several discussions that were taking place between the CM and the Government of India representatives in the course of the agitation in 1969, it was suggested by them to the Chief Minister “that the normal share of Telangana in the General Development expenditure of the State should take into account the backwardness of the region and that the share will have to be more than what is admissible in population ratio.” However, as Sri K.C. Pant, then Union Minister of State for Home Affairs, stated in a letter to the C.M. on 21st October, 1971, “the Chief Minister was not in a position to give any firm decision in this matter. Determination of this share was, therefore, left to the State Government and the high powered Telangana Development Committee.” The constitution of this Committee was one of the measures announced by the P.M. in the Lok Sabha on April 11, 1969. This Committee, headed by the Chief Minister of Andhra Pradesh, had as its members Cabinet Ministers from Telangana region, the Chairman of the TRC and a Member of the Planning Commission as its members.
Sri R. Venkataraman, then member of the Planning Commission (subsequently President of India) was this member.
5. Sri Venkataraman used to visit
6. According to the 1971 population, the actual population percentages of the three regions was Coastal Andhra 44.8, Rayalaseema 19.2 and Telangana 36. Taking these percentages for 90% and 5:3:2 for 10%, Telangana would have got 37.4% of the total Plan, Rayalaseema 20.2% and Coastal Andhra 42.4%. To put it in the perspective of the demand of the Regional Committee for 40% of the total Plan for Telangana, we may see that if the allocation for backward areas was made 20%, these ratios would have become 38.8% for Telangana, 21.3 for Rayalaseema and 39.9 for Coastal Andhra.
7.
VIII. The Mulki Rules, Andhra Agitation, 1972: President’s Rule:
Abolition of Regional Committee
1. We have so far dealt with issues relating to finances and development. There was, however, one other important consideration on which the SRC had recommended a separate State of
2. On 03-10-1972 the Supreme Court upheld the validity of the original Mulki Rules of Hyderabad State. They took the view that the Court having struck down Section (3) of the Public Employment Act 1957, the Mulki Rules ‘revive as also survive’. As a result an agitation was started in the Andhra region, which came to be known as the Andhra agitation. Consequently President’s Rule was imposed in the State early in 1973. Two Advisors were appointed. One was Sri V.K. Rao, who was till then the Chief Secretary of the State, and the other Sri H.C. Sarin who was posted from
3. Sri Sarin, on his arrival here, took up a series of discussions with various leaders and groups on the political situation in the State. After a few weeks, he called me and told me that he had heard from all groups, on both the Andhra and Telangana sides, that if he wanted an unbiased opinion of the various developments that had taken place, particularly in regard to finance and developmental issues, he should consult me. He gave me a note for my comments. I did not know who had prepared this note. Among many other issues, it also contained a suggestion that the Regional Committee should be abolished. The note I then prepared and gave to Sri Sarin is given in the appendix.
4. In my personal discussion with Sri Sarin, I explained to him that there were three aspects to the Andhra-Telangana issue. The first was in regard to the Mulki Rules and their application to employment and to educational institutions; the second was the Regional Committee and its powers and functions; and the third was the finances and economic development of Telangana. The Telangana leaders were concerned with all three issues, because they felt all of them were inter-related and were important for the development of the region. I said that, in my view, the Andhra leaders were actually interested only in the first issue viz., Mulki Rules. Even here their concern was mostly in regard to the capital city. After all they had, by then, been living in this city for more than 15 years and they resented any restrictions in regard to any kind of employment in the capital city and the educational facilities available to their children. Their attitude to the other issues was mostly indifferent, though they resented being held responsible for the backwardness of Telangana. It did not matter to them what the Regional Committee did. In any case, the Telangana MLAs also belonged to the same parties to which the MLAs of the Andhra region belonged. The Andhra MLAs were also not unduly concerned about issues relating to finances of Telangana. If, as alleged, certain Telangana finances have been diverted to the Andhra region in the earlier period, it was the consequence of the natural flow of finances in a
5. I told Sri Sarin that I could not see why the question of abolishing the Regional Committee had been raised. Whatever the Regional Committee may say, the final arbiter was the Government and the issue would come before the full Assembly. If the Regional Committee was abolished, as was suggested in the note, there would be no legal basis for showing Budget entries separately for Andhra and Telangana. There would then be no basis for calculating the revenues and expenditure of Telangana and Andhra regions separately. Without this there would be no way of calculating whether there were any Telangana surpluses. The entire work done so far, culminating in the Bhargava Committee Report and the agreed amendments discussed earlier in this note would become infructuous. Nevertheless, if for larger political considerations it was decided to abolish the Regional Committee, then the least that should be done was to make a minimum share of Telangana in the Plan a condition of the agreement. I explained that the formula already agreed to, which was being applied in the case of the Fourth Plan allocations, was that 10 per cent of the Plan was reserved for Backward areas, of this Telangana’s share was fifty percent. Of the remaining 90 per cent of the Plan allocation, Telangana’s share was on the basis of population. According to the 1971 census, the population of Telangana was 36% of the State. The formula, therefore, gave an overall plan share of 37.4% for Telangana (50% of 10 + 36% of 90). The Regional Committee had earlier passed a resolution asking for 40 per cent of the plan allocation. I said that it would be only fair to accept this 40 per cent if all the other safeguards such as the Mulki Rules, the Regional Committee and the separate accounts in the Budget were to be abolished. Once an allocation in the Plan was settled, it would not matter whether we determined Telangana surpluses separately because, in our method of financing the Plan, any surplus becomes a resource for the Plan and all new developmental expenditure is really plan expenditure.
6. I added that if such a share in the Plan was not assured the mere fact that there would be a separate Development Board for Telangana would not assure any minimum share for the region. Further, separate Boards for backward areas in the three regions would go against the contention of the Telangana leaders that Telangana was backward ‘as a region’. If the State Plan were not initially divided on a regional basis, the identification of backward areas would have to be done on the basis of State averages. If this were done many areas in Coastal Andhra, which Andhra leaders considered backward, would not be so identified, on the basis of State averages. We had experience of this in earlier exercises. If the Plan were initially broken up on a regional basis, then backward areas could be identified on the basis of regional averages. This would satisfy the regional leaders while leaders of the other regions would not be concerned because their Plan share would have been already determined. I was, therefore, of the view that the setting up of separate Development Boards for the three regions would neither compensate for the abolition of the Regional Committee nor would it serve any real purpose in the development of the backward regions.
7. I told Sri Sarin that I was not very conversant with the legal issues connected with the court judgments on the Mulki Rules. Sri Krishna Swamy Rao Saheb, who was then Revenue Secretary, would be in a better position to examine such issues. I suggested that I may be allowed to restrict myself to the financial and development issues. Accordingly, in all further discussions, Sri Sarin followed this division of issues.
8. Finally, in September 1973 a formula, which came to be known as the Six Point Formula, was evolved by the Union Home Ministry to which the MPs belonging to both the Andhra and Telangana regions agreed. This formula provided for the setting up of a State Planning and Development Board and three Planning and Development Committees for the three regions of the State. The Sixth point in this formula was that, “the above approach would render the continuance of Mulki Rules and Regional Committee unnecessary.” On October 22nd several legislators and MPs of both Andhra and Telangana met and accepted the Six Point Formula with certain clarifications. All the clarifications concerned the period of residence required in a region in the proposed rules for recruitment and admission to educational institutions. The substantive clause regarding the abolition of Mulki Rules and the Regional Committee remained. Accordingly, the Regional Committee was abolished by an amendment to the Constitution.
9. The Telangana agitation of 1969 resulted only in the strengthening of an existing Constitutional body viz., the Regional Committee through an order issued under Article 371(1). The Andhra agitation of 1973 resulted in the abolition of this Constitutional body through an amendment of the Constitution (Thirty Second Amendment 1973).
* * * * *
APPENDIX
Vide VIII, para 3.
B.P.R. Vithal
07-04-1973
The safeguards for Telangana incorporated initially in the Gentlemen's Agreement, later in the Prime Minister’s eight-point formula and more recently in the five-point formula were all based on the assumption – if not the admission – that Telangana was backward. Wisdom and consistency – however futile a quality they may have become – would, therefore, lie not in now denying that assumption but in trying to show that if despite these safeguards the backwardness continues it is due to the ineffectiveness of these measures rather than the ill-will of Andhras. Admittedly, there will be areas and sections of population even in Telangana that are better off than some areas or sections of population in Andhra, and it may well be that it is these sections that are more vociferous in their claim for safeguards than the really backward. But, after all, the backward are always led by the more forward among them. When we say there is a vested interest in backwardness it is these elements we mean and not the really backward. It is they who create a sense of common grievance and on this basis achieve a legitimacy of leadership that would otherwise be denied to them. There may be a wedge here but this will not be perceived now when the immediacy of an external threat makes the internal bond stronger.
To say that Telangana is not backward because Nizamabad is so developed is like saying the Scheduled Castes are not backward because the Defence Minister is a Harijan; or, conversely, to point out that Andhra also has backward areas is like showing that a number of Brahmins are poor and discriminated against. Right or wrong when an identity evolves historically for various social, economic and other reasons, whether they be rational or irrational, intellectual or emotional, one has to reckon with that identity as a fact. Undoubtedly, such an identity becomes over time a false projection and what might have initially served some purpose becomes at best an anachronism and at worst an impediment. But, even at such a time the identity cannot be merely wished away or instantly dissolved. It would have to be replaced by another identity. It is perhaps in this context that for some time now the concept of backward areas has been mooted as a counterpoise to the concept of Telangana; the hope – or attempt – being to introduce a new concept that is based on a similar grievance but which could have the double advantage of driving a wedge within Telangana and building a bridge across the other regions. There is no doubt some validity in this postulation. But the present circumstances are such that everyone will be suspicious even of well-intentioned attempts to build new identities or concepts. One has, therefore, to adopt a dual approach – accept the concept of Telangana being in its totality a backward region requiring some preference in matters of development; but also simultaneously float the concept of backward areas in general. The moment for the latter concept to totally replace the former will be when the contradictions between the backward areas of Telangana and its own developed areas will be greater than the contradiction between Telangana in general and the Andhra region. Today, that is not yet the position.
If this approach is adopted, a certain share of the plan outlays would have to be assured to Telangana. The Regional Committee once asked for 40 per cent of the Plan as Telangana’s fair share. If, for instance, this is accepted it would assure Telangana of a certain minimum investment for its development. Once this is done, it could be argued that the keeping of separate accounts, separate budgets etc. would be meaningless, since after all the operative part of that entire exercise was to ensure a fair share of investment for Telangana. We would have to show that a minimum share of the Plan would be a better safeguard than some precarious surpluses to be worked out by anonymous and fallible accountants on the basis of some abstruse classifications.
The expenditure on Telangana during the Third Plan period and subsequently has been consistently in the range of 38-40 per cent (two years alone recording over 44 per cent). State income and per capita income figures can be very misleading as indices of general development at any level and particularly so at levels below the State. However, subject to their general limitations they could serve a purpose in at least indicating the … growth and the inter se position. Thus, over the period 1960-61 to 1968-69 the per capita income in Telangana increased by 2.6 per cent whereas it increase only by 0.7 per cent in the rest of the State, the figure for the State as a whole being 1.4. Despite this, the per capita income for Telangana in 1968-69 in absolute terms was Rs. 450 compared to Rs. 494 for the rest of the State. The all-India rate of growth for the same period was 3.7 per cent and the per capita income in 1968-69 was Rs. 555. Thus, it will be seen that while the rate of growth in the Telangana region was higher than the rest of the State, this was not high enough to remove the disparity between the two regions, even though – if that is any consolation – the rest of the State was growing at a very low rate. This was because (a) the overall investment in the Plan itself was not high enough. When we compare the regional rates of growth we have to remember that the overall rate of growth achieved itself sets a kind of mathematical limitation on the regional growth; and (b) a high percentage of the expenditure included large outlays on Power generation and Projects like Pochampad and Nagarjunasagar which did not yield any benefit during this period. A silver lining to the latter fact would be that during subsequent periods the benefits will be high relative to the investments.
In this connection it may be mentioned that it has become a matter of prestige to plead for investment in large projects located in backward areas. In actual fact, however, it cannot always be assumed that there would be real benefit for the area from such projects. The super-thermal station at Kothagudem or the Srisailam Project will undoubtedly help the power position in the State and to that extent will help the backward areas also. But if other things are as they are now, the chances are that the power so generated will serve the more forward areas to a larger extent than the backward areas. Conversely, early completion of
The factors responsible for the lack of growth in backward areas can be classified under four broad heads:
(1) Factors inhibiting economic growth which are not peculiar to this area alone: These will be factors such as shortage of power on the industrial side, or lack of technological breakthrough in dry farming on the agricultural side, etc.
(2) Physical factors peculiar to the area which might inhibit development: Drought would be one such factor.
(3) A lack of economic infrastructure which would add further inhibiting factors in this area to the general ones mentioned under item (1) above.
(4) Lack of social infrastructure such as educational and medical facilities etc.
The problems that fall under item (4) above are also those which will be dealt with under the Minimum Needs Programme which has been stressed in the national approach to the fifth Plan. The Minimum Needs Programme would have to be drawn up and implemented on a sectoral basis, the criteria for selection of areas being certain indicators of development in each relevant sector. For instance, if educationally backward areas are to be brought up, those areas with enrolment below a particular level would have to be taken up for special attention. But, there is no reason to believe that these will be the same areas that would become entitled for special attention under some other item of the Minimum Needs programme. It may be interesting to mention here that Punjab which has the highest per capita income in
If, on the other hand, a compendious approach – to distinguish this from an integrated approach which is possible even when a sectoral approach is adopted – is to be adopted and backward areas are to be selected on the basis of some criteria of overall backwardness, the very selection of indicators of backwardness becomes a problem. In fact, we have already been wrestling with this problem and have, more as a measure of protecting ourselves against criticism rather than because we were at the end of our tether, referred this problem to the Planning Commission for advice. In any case, the problem of backwardness can be tackled on a special basis only if the area is compact and not too large. If the indicators selected are such that, say, 141 out of a total of 188 taluks are backward, then any special Board becomes meaningless because in that case most of the State would be backward. What may then be needed will be a Special Board for the forward areas leaving the State Plan as a whole to deal essentially with the problem of backwardness since the rest of the State would be backward!
In the case of the four factors mentioned earlier, it is only the second factor that would be necessarily linked up with a geographical area. That is why we could identify drought prone areas throughout the State on the basis of certain indices. The other three factors need not be correlated to a geographic area unless certain other social or historical factors have established such a correlation. In our case the three regions have distinct features in regard to these factors. It is this that makes them convenient units for socio-economic planning, of course, within the three regions there will be several economic zones based on their physical endowments, etc. We are in fact today preparing our perspective plans on a regional basis, the three regional plans being then coordinated into a State Plan.
The problem of the backward areas would, therefore, have to be looked at within the respective regional contexts in some aspects and as part of the sectoral approach in the related sectors coming under the minimum needs programme in other aspects. To conceive of a backward area plan on any other basis or on the assumption that such areas in different parts of the State have any common identity on the basis of a commonality of problems or circumstances would not be correct. It is difficult to see, therefore, what the function of a Development Board for backward areas would be. The minimum needs programme would itself take care of a number of these problems. The entire strategy of the Plan also would have to be so devised that priority is given for removal of regional imbalances. The development of backward areas also should, therefore, be the responsibility of the State Planning Board itself and not of a separate body that would neither be able to take an integrated view of the problem nor would have the totality of resources at its command.
The Regional Committee is essentially a political device. The question whether it ought to be continued or it can be abolished has to be decided on considerations of political feasibility or expediency. It would, therefore, be a futile exercise to try and justify either the continuance or the abolition of the Regional Committee on the basis of its performance as a development body or on the basis of the relative merits and demerits of alternative development bodies for either the regions or the backward areas. In this view of the matter, no alternative body can possibly give the same political satisfaction as the Regional Committee as it is at present constituted. If it is felt on merely political considerations that this body could or ought to be abolished, no purpose will be served in trying to examine what alternative body would reduce the consequent dissatisfaction to the minimum. To use dialectical terminology, the abolition of the Regional Committee will be a qualitative change in the situation which cannot be quantitatively compensated. Once the Regional Committee is abolished, it would be best to look at the question of the alternative bodies to be devised on purely rational considerations of efficient planning rather than as adequate or attractive substitutes for this body.
B.P.R. VITHAL 07-04-1973.
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* This last contention of the Committee is of course quite valid but that was no reason to deny/refute the truth in the contentions of the Andhra representatives. Really the very first term of the Gentlemen's Agreement, in the minutes, ran like this: 1. The expenditure of the Central and General Administration of the State should be borne proportionately by the two regions and the balance of income from Telangana should be reserved for expenditure on the development of Telangana area. This arrangement will be reviewed after five years and can be continued for another five years if the Telangana members of the Assembly so desire.” - IMS.
§ The specific assurance pertained to ‘public employment in subordinate services only’ and that too for a ‘period of five years’ only, extendable by another ‘five years’ and for no longer. As such by 1967 the specific assurance in the form of continuance of Mulki Rules in any form had run its course. In this context it seems even the Telangana Safeguards movement of 1968-69 was not entirely justified since on the point of continuance of some form of Mulki Rules it is the ‘Telanganites’ who may be said to have violated the Gentlemen's Agreement and not the ‘Andhrites’.
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