Special Category Status

Special Category Status

News: Recently, Union Finance Minister made it clear that the Centre will not consider demands for “special category status” for any state citing the 14th Finance commission observations.

What is Special Category Status?
 SCS is a classification given by the Centre to assist development of states that face geographical and socioeconomic disadvantages.
 Constitution does not make a provision for SCS and this classification was later done on the recommendations of the Fifth Finance Commission in 1969.
 Status was first accorded to Jammu and Kashmir, Assam and Nagaland in 1969.
 Eleven States including Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand and Telangana have been accorded the special category state status.
 SCS is different from Special status which imparts enhanced legislative and political rights, while SCS deals with only economic and financial aspects.
 The 14th Finance Commission has done away with the 'special category status' for states, except for the Northeastern and three hill states. It suggested to fill the resource gap of such states through tax devolution by increasing it to 42% from 32%.

What are parameters upon which SCS is given?
 The parameters were based upon Gadgil Formula.
 It includes - Hilly Terrain, Low Population Density and/or Sizeable Share of Tribal Population, Strategic Location along Borders with Neighbouring Countries, Economic and Infrastructure Backwardness and Nonviable Nature of State finances.

What are benefits of having 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 in a financial year does not lapse and is carried forward.
 Significant concessions are provided to these states in excise and customs duties, income tax and corporate tax.
 30% of the Centre’s Gross Budget goes to Special Category states.
 However, granting such concessions results in increased burden on center’s finances and many other states (West Bengal, Andhra, Odisha) have been vocal for granting them similar status.