Telangana government fears that the number of people visiting Hyderabad will drop drastically and there is likely to be a consequent fall in sales of petroleum products and other commodities.The memorandum submitted by the Telangana government to the 14th Finance Commission also pointed out that many dealers reported sales only in Hyderabad though the products were sold all over undivided AP, creating a false picture that Hyderabad has a huge revenue-generation potential. Hyderabad accounted for nearly 80 per cent of the VAT collected in undivided AP, creating this erroneous impression about the revenue potential.
It says, “With limited revenue potential of eight of the ten backward and drought-prone districts and imminent erosion of the tax base in the remaining two districts, the fiscal scenario is bleak and a matter of serious concern.”It predicted that Telangana's share in the total tax base of undivided AP was around 44 per cent. It urged the commission to take into account erosion of tax base and increase in the establishment expenditure of the new state and allocate more funds.
The TS government also complained that there has been a systematic erosion of resources of Telangana between 2001 and 2010 as large tracts of government land, particularly on city outskirts in Ranga Reddy district were sold to private parties for over Rs 9,000 crore.
The report stated, “The claim that the combined state developed the capital city of Hyderabad falls flat. People in RR district, more particularly farmers, have lost their livelihood forever.”