Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.
Analyse the criteria and benefits associated with the Special Category Status (SCS) for states as outlined by various Finance Commissions and governmental policies. Evaluate the implications of recent changes and the shift from Planning Commission to NITI Aayog on the allocation of central assistance
Special Category Status (SCS) was introduced in 1969 by the National Development Council to provide preferential treatment to certain states facing distinct challenges. The recent shift from the Planning Commission to NITI Aayog has further impacted the allocation of central assistance.
Criteria for Special Category Status:
Hilly and Difficult Terrain: States with challenging geography that hinders infrastructure development.
Low Population Density: States with sparse populations that struggle with economies of scale.
Significant Tribal Population: States with substantial tribal populations facing socio-economic backwardness.
Strategic Location: Border states requiring additional security and infrastructure.
Economic and Infrastructure Backwardness: States lagging in economic development and infrastructure compared to the national average.
Non-viable Nature of State Finances: States with limited revenue-generating capacity and heavy dependence on central transfers.
Benefits of Special Category Status:
States with SCS received several advantages, including:
Higher Central Assistance: 90% grant and 10% loan for centrally sponsored schemes, compared to the standard 70:30 ratio for other states.
Preferential Treatment in Resource Allocation: Greater share of central funds and relaxed norms for project approval.
Tax Incentives: Concessions on excise duty and other taxes to attract investment.
Debt Relief: Easier terms for repayment of loans from the central government.
Policy Formulation and Coordination:
Planning Commission: Played a central role in formulating five-year plans and allocating funds based on planned expenditures.
NITI Aayog: Focuses on policy think-tanking, cooperative federalism, and fostering competitive and cooperative federalism without direct control over fund allocation.
Central Assistance Allocation:
Earlier System: Central assistance to SCS states was predetermined through planning mechanisms.
Post-NITI Aayog: Emphasis on performance-based incentives and sector-specific grants. The allocation is more dynamic and linked to specific outcomes rather than broad-based financial assistance.
Impact on States:
Reduced Financial Autonomy: States previously benefiting from SCS now rely more on performance and outcome-based funding.
Focus on Equitable Development: The shift aims to address disparities through targeted interventions rather than blanket financial support.
Recent Developments:
14th Finance Commission’s Recommendations: States receive 42% of central taxes, a significant increase aimed at empowering states through higher untied funds.
Sector-Specific Grants: Allocations are now more targeted towards health, education, and infrastructure, promoting balanced development across regions.
While SCS provided targeted financial support to address regional disparities, the new framework emphasises performance-based funding and equitable development. This transition reflects a move towards a more inclusive and outcome-oriented approach to state development, aiming to address the unique needs of each region while fostering competitive federalism.
Source The Indian Express : https://indianexpress.com/article/opinion/columns/why-states-must-reconsider-their-demand-for-special-category-status-9450017/