Politicians make several promises, just to win the votes. But, once made a promise and win the power, the leaders find things are not so easy for them to fulfill the promise as the rules stand in between. That too when it is related to finance, the rules are very tough and highly impossible to unless they are changed.
That is what Union Finance Minister Arun Jaitley finds now when it comes to giving money to Andhra Pradesh. His speech in Parliament after he tabled his budget on February 1, he found quoted the rules that are coming in the way of giving money to the state as promised at the time of bifurcation and during the 2014 elections. The officials of the finance department are struggling to find ways and means to fund Andhra Pradesh to fulfil the promises that they have made.
The two issues that Arun Jaitley had mentioned during his speech in Rajya Sabha the other day are highly complicated. Unless the existing rules are changed, which may require an amendment to the Constitution, majority of the financial promises that were made to the State could not be implemented. This is the difficulty that Jaitley finds in giving budget allocations which had irked the MPs who are agitating in Parliament ever since the budget was presented.
The 90:10 formula cannot be applied to the State as this ratio in giving funds to the States is permitted only for the States having the special category status. The 90:10 (90 per cent of funds as Central government share and 10 per cent State share) was what the leaders have promised at the time of elections. The Centre is entitled to give funds at 60:40 ratio for every state that has no special category status tag. Changing this rule for Andhra Pradesh is not possible as the States like Bihar and Odisha may also ask for the same.
If funds are to be given to the State at 60:40 ratio, then there is Financial Regulation and Budget Management (FRMB) norm that stands as a stumbling block in AP availing the credit. The State that has started with a huge revenue gap cannot fund the 40 per cent share of the Central schemes that come with the 60 per cent Central share. It has to go for borrowing to meet the 40 per cent share and if borrowing is the procedure, the Central funds too should be in the same borrowing procedure. In the borrowings the FRMB rules do not allow the State to go beyond the 4 per cent of its GSDP and that would require exemption from the FRMB norms.
Funding the capital construction too is also a big issue for the Centre as it had not yet recognised Amaravati as the new capital of the State. It would have to wait for five more years as stated in the AP Reorganisation Act to recognise a new capital for AP, as Hyderabad continues to be the common capital for 10 years. The finance rules of the Central government do not allow any funding for any non-existent city, Amaravati.
Having seen all these, the politicians should realise that promises might be easier to make but the financial norms are highly rigid. AP government has the better experience in implementing the loan waiver for the farmers, a promise that Chandrababu Naidu had made to the people during elections. Though he had promised total waiver, when it came for implementation he had to fix an eligibility limit and waive it in four phases with great difficulty. Finance prevails upon the promises and the politicians should understand these implications before making any popular promise.