Special Category Status (SCS)

• The 14th Finance Commission has explicitly said that no special status can be granted, and the Union Finance Minister has made it clear that the Centre will not take requests for "special category status" for any state into consideration.
• States that have been pressing for it for a while, like Odisha, Bihar, and Andhra Pradesh, are taken aback by this.

About special category status:

Historical aspect:

• Fifth finance Commission originally presented the idea of SCS in 1969.
• The Constitution does not mention it.
• Because of their fundamental characteristics, limited resource base, and inability to mobilise resources for growth, some states have historically been at a disadvantage compared to others.
• The National Development Council, a previous division of the Planning Commission, made the decision to give special category status earlier
• When the Planning Commission was replaced by NITI Aayog, the ruling party in the federal government is now in charge of deciding whether to grant special favours to states that fall into this category.
• The Center categorises states with geographic and socioeconomic difficulties as having Special Category Status (SCS), which aids in their development.

What is the parameter?

NDC granted this status to states with:

• Limited resource base, challenging terrain, and hills,
• Low population density or a sizable proportion of the population is tribal,
• Border nations sharing the international boundary, and backwardness,
• Financial and infrastructure lag,
• State finances are not viable.
• In order to aid the northeastern States, the 14th Finance Commission also suggested factors like "forest cover" for devolution, with a weightage of 7.5.
• In 1969, Jammu and Kashmir, Assam, and Nagaland were given status for the first time.
• Eleven States have been given the special category state status, including Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana.
• Telangana, the newest state in India, received the designation after being split off from Andhra Pradesh.
• With the exception of the Northeastern region and three hill states, the "special category status" for states has been abolished by the 14th Finance Commission.
• It proposed raising tax devolution from 32% to 42% in order to close the resource imbalance in these states.
• SCS is distinct from Special status in that Special status confers improved legislative and political privileges, whereas SCS only addresses economic and budgetary issues.
• States receiving special category status receive the following assistance:
• 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 the case of normal category states, while the remaining funds are provided by the state governments.

Advantages of SCS:

• States with special category status receive 90% of the funding needed for a centrally sponsored programme from the Centre, compared to 60% or 75% for other states, with the remaining amounts coming from the state governments.
• Unused funds are carried over and do not expire.
• These states receive large exemptions from excise and customs duties, income tax, and corporate tax.
• receiving central funding with preference.
• 30 percent of the Centre’s gross budget also goes to special category states.
• These states are eligible for debt relief and exchanging programs.

Problems with SCS:

• Numerous Requests: In addition to Andhra Pradesh, SCS status was also sought by Odisha and Bihar.
• Economic Burden: Notwithstanding the (14 Finance Commission) FFC's recommendation for further devolution to the State, the SCS imposes additional economic cost.
• Federalism is impacted because it impairs state-to-state competition and the financial links between the centre and the periphery.

Special Category Status VS Special Status are different.

• The National Development Council, a government administrative body, grants special category status, whereas the constitution grants special status through an Act that requires passage by a 2/3rds majority in both houses of Parliament.
• Jammu and Kashmir, for instance, benefited from both special category status and a special status under Article 370. Yet since Article 35A was repealed and J&K is now a union territory with its own assembly, it is no longer eligible for special category status.
• Legislative and political rights are strengthened by special status, but only economic, administrative, and financial issues are covered by special category status.

Way forward

• The Special Category States no longer exist as a result of the 14th Finance Commission's recommendations, and no State has been given special category status as a result.
• It's time to review the requirements and add more states to this exclusive group while eliminating others that no longer require such support.