Special Category Status

Special category status is given to the states that have certain level of backwardness due to their geographical location. In this article, you will learn about Special status and special category status, criteria of special category status, benefits, Andhra Pradesh special category status, etc.

This article will provide key insights for GS Paper-2 Polity and Governance of UPSC IAS Exam.

Table of Content

• Special category status India
• 14th finance commission on special category status
• Special category status criteria
• List of special category status states in India
• Special status vs special category status
• Special category status benefits
• Chronology of the accorded Special Category Status in India
• Criticisms of the Special Category Status
• Conclusion
• Frequently Asked Questions

Special category status India:

• Special category status aims to benefit certain backward states that are located in hilly terrains or geographically in difficult location, shares strategic international borders, and have social, economic and infrastructural backwardness.
• It was first introduced in 1969 on the basis of the recommendations of the 5^th Finance Commission.
• This formula was named as “Gadgil formula-based grants” after the then Deputy Chairman of the Planning Commission– Dr Gadgil Mukherjee.

14th finance commission on special category status:

• The “Gadgil formula-based grants ”was discontinued after recommendations of the 14^th Finance Commission were implemented.
• 14th finance commission recommended to remove this concept.

Special category status criteria:

• The states must have hilly or difficult terrain.
• The states must have low population density along with a sizeable share of the tribal population.
• The states must be located in strategic region along borders with neighbouring countries.
• The states must be economically and infrastructurally backward.
• The states must have non-viable nature of state finances.

List of special category status states in India:

• States with special category status in India includes: Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana.
• The National Development Council consisting of the Prime Minister, Union Ministers, Chief Ministers and members of the NITI Aayog, decides which states must be given this status.
• The Constitution does not include special provisions for the categorization of state as a ‘special category state’.
• Special category status Andhra Pradesh: Andhra Pradesh has earlier demanded this status but it was not passed by the Parliament.

Special status vs special category status:

	Special status	Special category status
Granting Authority	National Development Council	Parliament through an Act to be passed by 2/3rd majority in both the houses of Parliament
Approval Process	Administrative body of the government	Requires a 2/3rds majority in Parliament
Example	Jammu and Kashmir (erstwhile Article 370)- not applicable now	Jammu and Kashmir
Key Focus	Economic, administrative, and financial aspects	Legislative and political rights

Special category status benefits:

• The Central government finances 90% of the funds in the Central sector schemes and external aid.
• When money is left unspent, the states with this Status can carry it forward to the next term.
• Such states receive concession on excise, customs duties, income tax, and corporate tax.
• The Central government establishes special development boards in such states, provides reservation in local government jobs, educational institutions, etc.
• Such states will receive preferential treatment while getting central funds.
• 30% of the Central governments’ gross budget is reserved for the special category states.
• They can avail the benefit of debt-swapping and debt relief schemes.

Chronology of the accorded Special Category Status in India:

• 3 states in 1969: Assam, Nagaland and Jammu & Kashmir were granted special status.
• During 1974-1979, 5 more states were added: Himachal Pradesh, Manipur, Meghalaya, Sikkim and Tripura.
• In 1990, Arunachal Pradesh and Mizoram were added.
• In 2001, the state of Uttarakhand was added.

Criticisms of the Special Category Status:

• It increases the budgetary burden of the Union government.
• The status demand once when fulfilled for one status gives rise to demand of similar kind from other states.
  • Example: Odisha’s demand for special status.
• It will create laxity amongst the state government who may not always resort to better management of the funds provided under this status.
  • Example: expenditure of such funds on freebies.
• There are many socio-economic backward states that are not located near the international borders but are in need of such status in order to gain the benefits provided by it.
• This status also covers states that doesn’t fit in its definition (Example: Telangana).

Conclusion

The Union government has accepted 14^th Finance Commission recommendation for tax devolution in order to compensate the resource gap funding for such states after the removal of their Special Category Status. This formula was carry forwarded by the 15^th Finance Commission too. However, as these states still lags behind in terms of socio-economic development another financial tool with better provisions and formula to look after these states and which also doesn’t increase the budgetary burden should be devised.

Ref: Source-1

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FAQs (Frequently Asked Questions)