Bihar Chief Minister Nitish Kumar has implored Centre for granting Special Category Status for the state. He asserted Special Category status to the state will it will enhance availability of resources by lowering state’s contribution in centrally sponsored schemes, improve access to external resources. It will act as catalyst for private investment and will boost employment generation and improve life quality of people in the land locked state.
Special Category status
The concept of SCS was first introduced in 1969 by Fifth Finance Commission. It has been not mentioned in Constitution. The rationale for special status was that certain states were historically disadvantaged in contrast to others, because of their inherent features, low resource base and cannot mobilize resources for development.
The decision to grant special category status was earlier with former Planning Commission body called the National Development Council (NDC). NITI Aayog, which had replaced Planning Commission has no power to allocate funds for states falling under this category, therefore, now it is discretion of ruling party at Centre to dole out special favours to states.
Criteria for Special Category States
Earlier, NDC accorded this status to states having hilly and difficult terrain, low population density or sizeable share of tribal population, strategic location along borders with neighbouring countries, economic and infrastructural backwardness and non-viable nature of state finances. The 14th Finance Commission also had recommended variables such as “forest cover” for devolution, with weightage of 7.5 in criteria to benefit north-eastern States.
What Special Category States have in common?
They are special in the sense that they have special socio-economic, geographical problems, high cost of production with less availability of useful resources and hence low economic base for livelihood activities. States under this category have low resource base and are not in position to mobilize resources for their developmental needs even though their per capita income may appear high.
Which are Special Category Status States?
NDC had accorded Special Category Status only to 11 states, out of 29 states to target fund flow for better balanced growth. These states includes are seven states of North-East (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura), Sikkim, Jammu & Kashmir, Himachal Pradesh and Uttarakhand. Other states are referred as General Category States (GCS).
Benefits to Special Category Status States
Special Category Status states are given favored treatment in respect of plan financing and financial devolutions as compared to General Category States (GCS). According to Gadgil-Mukherjee formula for devolution of Central assistance for States plan as approved by NDC, 30 % of total funds is earmarked for Special Category States.
Special category States receive 90% central assistance as grant and just 10% as loan in composition of Central assistance as compared to central assistance of 30% grant and 70% loan for Special Category States. Moreover, these states get favored treatment from hands of Finance Commission in respect of devolution of Central tax revenues.
Present position of Centre
After establishment of NITI Aayog and recommendations of 14th Finance Commission, Central plan assistance to SCS States was subsumed in increased devolution of divisible pool to all States (from 32% in 13th Finance Commission recommendations to 42%).
Many states such as Andhra Pradesh, Bihar and Odisha are craving for Special Category State status because of nature of benefits these states are getting. In response to demand of these states, Central Government held that 14th Finance Commission has effectively removed concept of Special Category States after its recommendations were accepted in 2015 and it has restricted it only to north-eastern and three hilly states.