DMPQ Premium-Discuss the financial issues arising after the bifurcation of Andhra pradesh.

The Andhra Pradesh Reorganization Act, 2014, an Act of the Indian Parliament bifurcated the erstwhile State of Andhra Pradesh into Telangana and Andhra Pradesh, effective from June 2, 2014. Financial Implications of bifurcation are intense.

  • 46% of the estimated revenue was given to Andhra Pradesh against a population of 58%. Assets have been allocated on location basis (most of which were located and thus left behind in Hyderabad), whereas liabilities have been divided on population basis.
  • The pension liability of the combined State was also divided on population basis.
  • The power allocation was done on consumption basis.
  • Refund of taxes, a liability, was allocated on population ratio, whereas deferred tax collections, which is an asset, is given on location basis (being treated as the location of the Head Office, which are mostly in Hyderabad). This alone has caused a huge loss of about Rs. 3,800 crore to the State of Andhra Pradesh.
  • The State of Andhra Pradesh lost its capital city, institutions, manufacturing centers and service sector hubs while inheriting the drought prone and cyclone hit areas.
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