Special Category Status to States
20, Feb 2023
Prelims level : Governance – Policies Mains level : GS-II Indian Constitution- historical underpinnings, evolution, features, amendments, significant provisions and basic structure.
Why in News?
- Central government will not consider demands for “special category status” for any state.
About the News:
- States such as Odisha (vulnerability to natural disasters), Andhra Pradesh and Bihar (backwardness) have been pushing for “special category status” for some years now.
- The 14th Finance commission has clearly said no special status can be given.
What is Special Category Status (SCS)?
- There is no provision of SCS in the Constitution; the Central government extends financial assistance to states that are at a comparative disadvantage against others.
- The concept of SCS emerged in 1969 when the Gadgil formula (that determined Central assistance to states) was approved.
- First SCS was accorded 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.
What are the differences between Special Status and Special Category Status?
- The constitution provides special status through an Act that has to be passed by 2/3rds majority in both the houses of Parliament whereas the special category status is granted by the National Development Council, which is an administrative body of the government.
- For example, Jammu and Kashmir enjoyed a special status as per Article 370 and also special category status as per Article 371.
- But now Article 35A has been scrapped and it has become a union territory with legislature. Now, both Special Status and Special Category status doesn’t apply to J&K anymore.
- The Ministry of Home Affairs (MHA) is holding consultations with the Union Territories of Jammu and Kashmir (J&K) and Ladakh to grant them “special category status” on the lines of Article 371 of the Constitution.
What are the criteria for Special Category Status?
- Hilly and difficult terrain
- Low population density or sizeable share of tribal population
- Strategic location along borders with neighbouring countries
- Economic and infrastructural backwardness
- Non-viable nature of state
Who grants Special Category status to states?
- The decision to grant special category status lies with the National Development Council, composed of the prime minister, union ministers, chief ministers and members of the planning commission, who guide and review the work of the commission.
- Special category status for plan assistance has been granted in the past by the National Development Council (NDC) to some states that are characterized by a number of features necessitating special consideration.
What are the Benefits confer to the states with special category status?
- The central government bears 90 percent of the state expenditure on all centrally-sponsored schemes and external aid while rest 10 percent is given as loan to state at zero percent rate of interest. Usually, the ratio for general category States is 70% loan and 30% grant.
- Preferential treatment in getting central funds.
- Concession on excise duty to attract industries to the state.
- 30 percent of the Centre’s gross budget also goes to special category states.
- These states can avail the benefit of debt-swapping and debt relief schemes.
- States with special category status are exempted from customs duty, corporate tax, income tax and other taxes to attract investment.
- Special category states have the facility that if they have unspent money in a financial year; it does not lapse and gets carry forward for the next financial year.
What are the concerns?
- Considering special status to any new State will result in demands from other States and dilute the benefits further.
- It is also not economically beneficial for States to seek special status as the benefits under the current dispensation are minimal.
- Therefore, States facing special problems will be better off seeking a special package.