News: Assembly session: Centre should not have ‘absolute numbers’ if A.P. is to secure Special Category Status, says Chief Minister Jagan Mohan Reddy

What is Special Category Status (SCS)?

  • SCS is a classification given by the Centre to assist development of states that face geographical and socio-economic disadvantages.
  • The Constitution does not make a provision for SCS and this classification was later done on the recommendations of the Fifth Finance Commission in 1969.
  • Status was first accorded to Jammu and Kashmir, Assam and Nagaland in 1969.
  • The erstwhile Planning Commission allocates funds to states through central assistance for state plans. Central assistance can be broadly split into three components: Normal Central Assistance (NCA), Additional Central Assistance (ACA) and Special Central Assistance.
  • Currently, 11 States including Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand and Telangana have been accorded the special category state status.

Recommendations of 14th Finance Commission:

  • The 14th Finance Commission has done away with the ‘Special Category Status’ for states, except for the North-eastern and three hill states.
  • It suggested filling the resource gap of such states through tax devolution by increasing it to 42% from 32%.
  • The interstate inequalities to be addressed through adequate tax devolutions and grants.
  • Under the Finance Commission, some states receive revenue deficit grants.

Note: Special Category Status (SCS) is different from Special status which imparts enhanced legislative and political rights, while SCS deals with only economic and financial aspects.

Criteria to fulfil for SCS:

There are some criteria based on Gadgil-Mukerjee Formula as follows:

  • Hilly Terrain
  • Low Population Density and/or Sizeable Share of Tribal Population
  • Strategic Location along Borders with Neighbouring Countries
  • Economic and Infrastructure Backwardness and
  • Nonviable Nature of State finances.

Significance of SCS:

  • The Centre pays 90% of the funds required in a centrally-sponsored scheme to special category status states as against 60% or 75% in case of other states.
  • The unspent money in a financial year does not lapse and could be carried forward.
  • 30% of the Centre’s Gross Budget goes to Special Category states.
  • Some significant concessions are provided to these states in excise and customs duties, income tax and corporate tax.

Concerns over SCS:

  • It impacts over burden on Central Finances.
  • Benefits flow regularly without any accountability or performance monitoring of the states.
  • Lack of constitutional or legal status.
  • It leads to a Spill-over Effect like giving special status to a state leads to demands from other states too. For instance, demands from Andhra Pradesh, Odisha and Bihar.

Way forward:

  • Monitoring and accountability and granting of the SCS to a state should be through performance expectation.
  • Adopting a target-based, time-bound arrangement that is focused on accountability, performance, and monitoring of achievements, with specific performance goals to be achieved by the beneficiary states for the benefits to continue.


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