Assembly Elections: On 9th October, 1996, the President issued a Proclamation revoking President's Rule in the State. The same day, a National Conference Government headed by the Dr. Farooq Abdullah was sworn in, which included 13 Cabinet Ministers, 12 Ministers of State and 2 Deputy Ministers. The inaugural Session of the State Assembly was held in Srinagar on 18-25 October, 1996.

The successful conduct of Assembly elections and installation of a popular Government in the State after a period of over six years of President's Rule, can be seen as a significant watershed in the recent history of the State. It is also hoped and expected that they would also serve as a significant further step towards the restoration of complete peace and normalcy in the State, notwithstanding the continued efforts of Pakistan and its surrogates to keep up violence, disturbances and to try to derail the democratic process and institutions.

Security Situation: ... The overall level of violence, in terms of the number of incidents, came down significantly during the current year, as compared to the previous year. This was despite the fact that there were deliberate attempts by the terrorists, and their mentors across the border, to set up violence in a desperate effort to try and thwart the restoration of the political and democratic process, and the conduct of the Parliamentary and Assembly elections in the State. There was an over 40 per cent reduction in attacks on the security forces, while there was an increase in attacks on and the number of casualties among civilians. This demonstrated that the security forces had continued progressively to gain effective domination on the militants, as also the desperate effort of the latter to keep the people in a state of fear and terror through targetted as well as random killings of civilians, which further intensified the growing disillusionment among the people with the activities of the militants. It is also significant that, during the year, the number of civilian casualties in cross fire and in security force actions was only 83 as compared to 171 in the previous year.

Economic Package Announced by the Prime Minister: In the light of the successful holding of Parliament elections and in view of overall improvement in the situation, it was felt that effective steps should be taken for economic development of the State. In view of this, an economic package was announced by the Prime Minister in both Houses of Parliament on 23.7.1996 and 2.8.1996. The salient features of the package are detailed below :-

1) Central Government would expedite the implementation of the new Railway line project from Udhampur to Srinagar and then to Baramulla in Kashmir Valley covering a distance of about 290 kms. The Project was approved by the Central Government at an estimated cost of Rs.2,500 crores. This railway line, will provide an all weather cheap means of communication between the Valley and rest of the country and is expected to mitigate the sense of isolation of the people living in the Valley, besides providing a much quicker means of transportation for export and import of perishable goods like fruits and vegetables.

2) Expeditious construction of Mughal Road as a viable alternative link between J&K as a part of Centrally Sponsored Schemes of "Roads of Economic Importance" at a cost of nearly Rs.77.40 crores would be taken up. The cost of the project will be shared between the Centre and the State at a ratio of 50:50.

3) Work on the construction of Dulhasti and Uri Hydel Projects in the State would be expedited so as to provide much relief to the power starved State.

4) The situation in the State in the last few years had greatly effected economic activities in the State. Activities related to tourism, industry, trade, transport, house boat business were badly affected. To revive these activities, loans where the initial borrowing was upto Rs. 50,000/- would be waived off. It was also decided to examine the possibility of relief to the borrowers whose initial borrowings were more than Rs.50,000/ -. For this purpose, an Inter- Ministerial Committee would be set up

5) To bridge Non-Plan gap of J&K State, a Special Central Plan Assistance would be made, so that entire plan outlay for the current financial year can be utilised for the development schemes without having to divert any part of it to meet the non-plan gap.

6) A grat of Rs.6.6 crores for improvement of camps in Jammu & Kashmir for migrants would be made.

7) A grant of Rs.2.40 crores would be given for setting up of a Convention/Conference Centre at Leh to give a further fillip to tourism in this area.

8) High priority for development of airport at Kargil at a cost of Rs. 25 crores will be given to ensure completion of the project within a two years period. In the meantime, the Government would provide weekly helicopter service in Kargil instead of present fortnightly service.

9) In order to meet longstanding demand that Jammu city should be granted B-2 status, Government of India has decided to upgrade the status of Jammu city to B-2 city.

Follow-up action is being taken for implementing above mentioned announcement in a time bound manner. The progress is being monitored closely.

Autonomy: An important issue during the discussions pertained to the question of Autonomy. The Government, in the Common Minimum Programme, has stated that it is in favour of "Maximum Autonomy" for the State. It was also stated during the inter-party discussions, and in Parliament that the details in this regard could be worked out only after further discussions and consultations when there is an elected Assembly and Government is in position, where after the Government of India would take appropriate decisions in the matter.

The State Government set up two Committees to deliberate on the question of Autonomy for the State, and Regional autonomy within the State respectively. The Committee for the former is headed by the former Sadr-e- Riyasat, Dr. Karan Singh and comprising eight other members; while the Committee relating to internal autonomy is headed by the Chief Minister, with Shri Balraj Puri as the working Chairman, and comprising  four other members. A committee was also set up by the Government of India under the Chairmanship of the Principal Secretary to Prime Minister and comprising the Cabinet Secretary, Home Secretary/Secretary, Department of J&K Affairs and the Law Secretary, inter alia to deliberate on the question of autonomy.