Don’t disturb level-playing field: Jaya to PM

​New Delhi: Tamil Nadu Chief Minister J Jayalalithaa, who met Prime Minister Narendra Modi here on Tuesday - the first time after she got re-elected - raked up the issue of "across the board area-based tax concessions to AP and Telangana" again.

Sources point out that though Jayalalithaa’s wish-list - a charter of 29 demands - included key issues like Srilankan Tamils' rehabilitation and special packages to Tamil Nadu to "overcome the financial mess that the earlier DMK government created for the State - she did not forget to caution the Centre against extending any largesse to the neighbouring that could affect her State.

Pointing out that she had already written a letter in the past in this regard to the Prime Minister, she reportedly suggested that the level-playing field must not be disturbed under any manner.

The Centre would extend all the help to the new States but it should be borne in mind that it could not affect the interests of Tamil Nadu, she is said to have told the PM.

Even in extending across the board area-based tax concessions, the Centre must be careful so as not to render Tamil Nadu helpless of uncompetitive.

Referring to the reported news that the PM had directed the NITI Aayog officials to devise a suitable package to AP following pressure from BJP's ally and AP Chief Minister N Chandrababu Naidu, she made this reference to area-based tax concessions to AP and Telangana States, it is said.

In her letter earlier, Jayalalithaa had stated that “as a neighbouring State, we do not begrudge the benefits” sought to be conferred on Andhra Pradesh and Telangana for their development,

she drew the attention of the Prime Minister to a clause in the Andhra Pradesh Reorganization Act which promised tax concessions to the two States to promote industrialization and economic growth.

The nature and type of concessions had not been indicated in the Act and “the matter appears to have been left to the discretion of the Government of India,” she said.

Pointing out that the Act itself contained a substantial and significant economic package, she wanted Modi to adopt a “cautious approach” to the complex issue of providing area based tax concessions in the name of encouraging economic development in the two States.

“Such exemptions run counter to one of the basic thrusts of economic reforms — a rational tax policy that is neutral, encourages a common market in the country, rewards competitive efficiency, and exploits comparative advantage,” she had argued.

She gave an account of the rationale behind tax reforms in the last 20 years which were directed towards rationalisation and simplification of various exemptions. The Centre had also attempted to reduce and eliminate various exemptions.

She recalled that, in August 2005, she had sought withdrawal of area based exemptions from income tax and central excise for new industrial units located in parts of Himachal Pradesh (HP) and Uttaranchal or Uttarakhand.

Any extension of such area based concessions to Andhra Pradesh or Telangana would cause a huge flight of capital and relocation of industries, in particular from neighbouring States, Jayalalithaa apprehended, adding that the exemptions were also fiscally “very expensive.”

Andhra Pradesh or Telangana could not be compared with any of the hill states which had been conferred with the Special Status and hence concessions that were inherent to such a Status should not be conferred to AP or Telangana in one form or the other, she insisted, it is learnt.

By:W Chandrakanth