Special Category Status (SCS)

In News

• Recently, the Andhra Pradesh High Court questioned the Centre for not granting Special Category Status (SCS) to Andhra Pradesh.

Background

• In 2016, a special package was given to Andhra Pradesh in lieu of the special status, but industrial incentives being given to a few other States under package-2 were not being given to Andhra Pradesh.
• The special assistance was given to Andhra Pradesh to make up for the additional Central share the State might have received during 2015-16 to 2019-20, if the funding of Centrally Sponsored Schemes (CSS) would have been shared at the ratio of 90:10 between the Centre and the State. 
• The special assistance is to be provided by way of repayment of loan and interest for the Externally Aided Projects (EAPs) signed and disbursed during 2015-2016 to 2019-20 by the State.

About Special Category Status (SCS)

• Meaning: 
  • Special Category Status (SCS) is a classification given by the Centre to assist in the development of those states that face geographical and socio-economic disadvantages.
  • This classification was done on the recommendations of the Fifth Finance Commission in 1969.
  • Parameters: It was based on the Gadgil formula. The parameters were: 
    • Hilly Terrain;
    • Low Population Density And/Or Sizeable Share of Tribal Population;
    • Strategic Location along Borders With Neighbouring Countries;
    • Economic and Infrastructure Backwardness; and
    • Non-viable Nature of State finances.
• Constitutional Provisions:
  • While the Constitution does not have any provision for categorisation of any state as a Special Category Status (SCS) State, but considering the fact that some areas in India are historically disadvantaged as compared to others, the Centre has assisted states with funds in the past allocated by the former Planning Commission body called the National Development Council (NDC). 
• Assistance states get with Special Category Status: 
  • The Centre pays 90 percent of the funds required in a centrally-sponsored scheme to special category status category states as against 60 per cent in case of normal category states, while the remaining funds are provided by the state governments.
• When was the first Special Category status bestowed?
  • The NDC  first accorded SCS 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.
• Information from NITI AAyog:
  • As per the information provided by the NITI Aayog, 11 states namely, 
    • Arunachal Pradesh, 
    • Assam, 
    • Himachal Pradesh, 
    • Jammu & Kashmir, 
    • Manipur, 
    • Meghalaya, 
    • Mizoram, 
    • Nagaland, 
    • Sikkim, 
    • Tripura and 
    • Uttarakhand was granted special category status. 

Benefits 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, while the remaining funds are provided by the state governments.
• Unspent money does not lapse and is carried forward.
• Significant concessions are provided to these states in excise and customs duties, income tax and corporate tax.
• 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.

Challenges with SCS

• Multiple Demands: Aside from Andhra Pradesh, Odisha and Bihar had demanded SCS status. 
• Economic Burden: The SCS puts additional economic burden when the increased devolution is already flowing to the State as recommended by the FFC.
• Affecting Federalism: It affects the centre state financial relations and hinders competitive federalism among the states.

Difference between Special Category Status and Special 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. But now that Article 35A has been scrapped and it has become a union territory with legislature, special category status doesn’t apply to J&K anymore.
• Special status empowers legislative and political rights while special category status deals only with economic, administrative and financial aspects.

Way Ahead

• Following the recommendations of 14th Finance Commission, the Special Category States cease to exist and thus, no special category status has been granted to any State. 
• It is time to revisit the criteria and include other states into this exclusive category by excluding those who do not need such assistance any longer.

Source: TH