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Special Category Status for States
Context:
Telugu Desam Party (TDP) president N Chandrababu Naidu, after winning 16 Lok Sabha seats, has become crucial for the BJP’s 240-seat majority, likely leveraging support to secure Special Category State status for Andhra Pradesh.
What is Special Category Status (SCS)?
- In 1969, the Fifth Finance Commission of India introduced Special Category Status (SCS) to aid certain states in their development and accelerate growth if they faced historical economic or geographical disadvantages.
- The system was discontinued based on the recommendation of the 14th Finance Commission, which proposed addressing states’ resource gaps by increasing the devolution of tax from 32% to 42%.
Constitutional Basis:
- Part XXI of the Indian Constitution: Titled “Temporary, Transitional and Special Provisions,” outlines special provisions for states.
- Temporary Nature: Initially intended to be temporary, these provisions have persisted for decades, sparking ongoing debates and analyses.
Objectives of Special Provisions:
- Respect and Protection of Identity: Upholding the unique identity and rights of people in states with special provisions.
- Promotion of Socio-economic Development: Bridging developmental gaps.
- Ensuring Participation in National Mainstream: Fostering inclusivity.
- Maintenance of Peace and Stability: Acknowledging and addressing unique regional challenges.
- Strengthening National Unity and Integrity: Accommodating diversity within the constitutional framework.
Criteria for SCS:
- Hilly Terrain: The state must have a significant portion of its area covered by hills and mountains.
- Low Population Density and/or Sizeable Share of Tribal Population: The state must have a low population density and/or a significant proportion of its population consisting of tribals.
- Strategic Location along Borders with Neighbouring Countries: The state must be located along international borders with neighbouring countries.
- Economic and Infrastructure Backwardness: The state must be economically and infrastructurally backward.
- Nonviable Nature of State Finances: The state must have non-viable finances, meaning it cannot sustain itself financially without assistance.
Current Status: Currently, 11 states have been granted SCS, including Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana.
Benefits:
- Central Assistance: The central government provides up to 90% of the funds for centrally sponsored schemes in the form of grants and 10% as loans.
- Tax Concessions: The states receive concessions in customs and excise duties, income tax, and corporate tax.
- Special Plan Assistance: The states receive special plan assistance for projects of importance to the state.
- Unspent Funds: Unspent funds do not lapse at the end of the financial year.
Recent Demands for SCS:
- Bihar:
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- Criteria Met: Bihar argues it meets most of the SCS criteria, such as economic and infrastructural backwardness, despite lacking hilly terrain.
- Reason for Demand: The state has been demanding SCS for years to address poverty and backwardness.
- Andhra Pradesh:
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- TDP’s Demand: The Telugu Desam Party (TDP) has been demanding SCS since Andhra Pradesh’s bifurcation in 2014.
- Promise Unfulfilled: TDP argues that Andhra Pradesh was promised SCS for five years as compensation for losing its revenue-rich capital Hyderabad.
- Political Action: The TDP withdrew from the NDA alliance in 2018 citing “injustice” due to the denial of SCS.
- Odisha:
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- Long-standing Demand: Odisha has been pushing for SCS for several years.
- Criteria Met: The state argues it meets the criteria of economic and infrastructural backwardness and nonviable state finances.
Issues Related to SCS:
- Lack of Constitutional or Legal Basis: SCS is based on discretionary decisions by the National Development Council (NDC) or the central government.
- Criteria Lack Uniformity or Transparency: Absence of clear criteria for granting SCS, leading to demands from other states.
- Ambiguity in Duration or Review: Some states receive SCS temporarily, while others have it for decades.
- Absence of Impact Assessment: No clear evidence showing that SCS has accelerated growth in beneficiary states.
- Fiscal Discipline Concerns: Misuse or diversion of funds intended for specific purposes.
Way Forward:
- Reviewing Existing Provisions: Regular assessments to ensure alignment with evolving needs.
- Transparency and Accountability: Clear communication and responsible implementation.
- Finding Common Ground: Promoting collaboration between states and the Central government for a unified and fair India.