How did the special category status (SCS) for states work in India - an analysis
SHARE:
What are SCS - Special Category Status - states of India
- The story: The concept of a special category status was introduced in 1969 when the fifth Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks, establishing special development boards, reservation in local government jobs, educational institutions, etc.
- Gadgil-Mukherjee formula: Part 4 of the Gadgil-Mukherjee formula stipulates a state that is "financially disabled" and "lacking in infrastructure facilities" is qualified for SCS status.
- Up to 3rd Five Year Plan (FYP) [1961-66] and during Plan Holiday (1966-69), allocation of Central Plan Assistance was schematic and no formula was in use.
- The Gadgil Formula comprising (i) Population [60%] (ii) Per Capita Income (PCI) [10%] (iii) Tax Effort [10%] (iv) On-going Irrigation & Power Projects [10%] and (v) Special Problems [10%] was used during 4th FYP (1969-74) and 5th FYP (1974-78). But since item (iv) was seen as being weighted in favour of rich states, the formula was modified changed by raising the weightage of PCI to 20%.
- The National Development Council (NDC) approved the modified Gadgil formula in August 1980. It formed the basis of allocation during 6th FYP (1980-85), 7th FYP (1985-90) and Annual Plan (AP) 1990-91. Following suggestions from State Governments, the modified Gadgil Formula was revised to Population (55%), PCI [25% {20% by deviation method and 5% by distance method}], Fiscal Management (5%) and Special Development Problems (15%). However, it was used only during AP 1991-92.
- A Committee under Pranab Mukherjee, then Deputy Chairman, Planning Commission was constituted to evolve a suitable formula. The suggestions made by the Committee were considered by NDC in December 1991, where following a consensus, the Gadgil-Mukherjee Formula was adopted.
- It was made the basis for allocation during 8th FYP (1992-97) and it has since been in use. After setting apart funds required for (a) Externally Aided Projects and (b) Special Area Programme, 30% of the balance of Central Assistance for State Plans is provided to the Special Category States. The remaining amount is distributed among the non-Special Category States, as per Gadgil-Mukherjee Formula.
- Using it first: The SCS was first accorded in 1969 to Jammu and Kashmir, Assam and Nagaland. Since then eight more states have been included (Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand). There is no provision of SCS in the Constitution.
- Special Category Status for plan assistance was granted in the past by the National Development Council to the States that are characterized by a number of features necessitating special consideration. Now, it is done by the central government.
- The govt. informed the Parliament in 2018 that 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 were granted special category status. Special Category Status for plan assistance was granted in the past by the National Development Council to the States that are characterized by a number of features necessitating special consideration. These features included: (i) hilly and difficult terrain (ii) low population density and /or sizeable share of tribal population (iii) strategic location along borders with neighbouring countries (iv) economic and infrastructural backwardness and (v) non-viable nature of state finances. Special Category Status was granted based on an integrated consideration of these criteria.
- The 14th Finance Commission has done away with the 'special category status' for states, except for the Northeastern and three hill states. Instead, it suggested that the resource gap of each state be filled through ‘tax devolution’, urging the Centre to increase the states' share of tax revenues from 32% to 42%, which has been implemented since 2015.
- Benefits to SCS States: 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. Many concessions are provided to these states in excise and customs duties, income tax and corporate tax.
- Special status versus 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.
- So, Jammu and Kashmir enjoyed a special status as per Article 370 and also the special category status. But now that Article 35A has been scrapped and it has become a union territory with legislature, so special 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.
- EXAM QUESTIONS: (1) Explain why the Special Category Status (SCS) concept was dropped by the Finance Commission of India. (2) Are the Finance Commission allocations just and equitable? Explain with facts.
#specialstatusstates #specialcategorystatus
* Content sourced from free internet sources (publications, PIB site, international sites, etc.). Take your own subscriptions. Copyrights acknowledged.
COMMENTS