What is special category status?

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What is Special Category status?

  • While the Constitution does not have any provision for categorisation of any state as a Special Category Status (SCS) State, but considering the fact that some areas in India are historically disadvantaged as compared to others, the Centre has assisted states with funds in the past allocated by the former Planning Commission body called the National Development Council (NDC).

What does The 14th Finance Commission say about the Special Category status? 

  • In the past, the NDC considered factors such as difficult and hilly terrain, low population density and/or a sizeable share of tribal population, strategic location along borders, economic and infrastructural backwardness, and non-viable nature of state finances. The NITI Aayog, which has replaced the Planning Commission, has no power to allocate funds  — therefore, the discretion that the ruling party at the Centre had to dole out special favours to states through the Plan panel, no longer exists.
  • The Centre says the Fourteenth Finance Commission effectively removed the concept of Special Category States after its recommendations were accepted in 2015. The Centre, Arun Jaitley has said, was willing to provide the “monetary equivalent” of a special category state to Andhra Pradesh but would not be able to grant the “special status” that was restricted only to the north-eastern and three hilly states by the 14th Finance Commission.

What assistance do states with Special Category Status get?

  • The Centre pays 90 per cent of the funds required in a centrally-sponsored scheme to special category status category states as against 60 per cent in case of normal category states, while the remaining funds are provided by the state governments. 

What has the Centre assured Andhra Pradesh?

  • Finance Minister Arun Jaitley had said that for Andhra Pradesh, the Centre is committed to giving 90 per cent of the funds, equivalent to special category states, through other means like external agencies.
  • However, the Centre has agreed to give “special assistance” to AP for five years, which would make up for the additional central share the state might have received during these years — 2015-16 to 2019-20, as envisaged by Singh’s 2014 statement. This will be in the form of Union funding for externally aided projects that have been signed and disbursed during these years. AP is demanding that special assistance funding should be in the 90:10 ratio (Centre: state) for both EAPs and centrally-sponsored schemes — which adds up to about Rs 20,010 crore of central assistance. Because the state government may not be able to spend this amount on EAPs in the stipulated five years, AP is demanding that the Centre allow it to use the money to clear outstanding loans. It is seeking permission to borrow from internal lenders like NABARD, HUDCO and other commercial banks, and to use the gap to pay interest commitments to the Government of India, NABARD and EAPs.
  • The Centre is also willing to accept the state government’s suggestion of raising funds through NABARD. At meetings with the state government last month, the Centre suggested creation of a special purpose vehicle (SPV) where NABARD could give the money so as not to upset the fiscal deficit of the state, Jaitley said, adding that the Andhra Pradesh government is yet to come back on the modalities of this proposal. On meeting the revenue deficit of the state, he said, the Centre has already paid around Rs 4,000 crore and only Rs 138 crore remain.

Which are the other states that are demanding the Special Category Status?

  • Aside from Andhra Pradesh, Odisha and Bihar had demanded SCS status. However, they have not been granted the status as they did not fulfill the criteria to be qualified as an SCS State.

When was the first Special Category status bestowed?

  • The NDC  first accorded SCS in 1969 to Jammu and Kashmir, Assam and Nagaland. Over the years, eight more states were added to the list — Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and, finally, in 2010, Uttarakhand. Until 2014-15, SCS meant these 11 states received a variety of benefits and sops.