What is special category status? What is its historical perspective? Who assigns it to the states? What are its benefits? What are the criteria to give the status of Special Category States? Read further to know more.
The Center categorises states with socioeconomic and geographic disadvantages as having special category status to help them flourish. Under the Fifth Finance Commission’s advice, this classification was made in 1969.
India is a “union of the states”. There are currently 29 states and 7 union territories in India. According to the recommendations of the Finance Commission, which the President of India established, all of these states and union territories receive a portion of the central government’s revenues every five years.
According to Article 275 of the Indian Constitution, the central government may provide any state with additional financial aid outside of the recommendations of the Finance Commission. Out of the 29 Indian states, 11 already have the designation of Special Category States, and 5 more are requesting it. This is important to note.
Special Category Status
Three states—Jammu and Kashmir (currently union territories), Assam, and Nagaland—were granted the status of Special Category States in 1969 by the Fifth Finance Commission, under the chairmanship of Mahavir Tyagi. When the Gadgil formula was authorised in 1969, the idea of Special Category Status was first introduced.
- The social, economic, and geographic backwardness of these three states was the justification for granting them special status.
- States that meet certain requirements, including hilly and challenging terrain, strategic border locations, low per capita income, low population density, the presence of sizable tribal populations, economic and infrastructure backwardness, and the unviable nature of State finances, are given special category status.
- In order to attain uniform growth, and equality, and promote inclusive development, some states require special attention due to their non-uniformity, unequal development, tribal areas, backwardness, and people’s desires.
- On the other hand, all of these special arrangements have emerged as a result of ongoing constitutional changes.
- The Constitution does not contain any SCS provisions.
- The National Development Council has in the past granted States with a variety of characteristics that call for particular consideration Special Category Status for plan assistance. Today, the central government handles it.
- Goal: To provide central assistance and tax breaks to underprivileged states as preferential treatment. Many states have received help from the National Development Council in the past as part of the Central Plan.
- At first, only Assam, Nagaland, Jammu and Kashmir received special status.
- Under the 4th Five-Year Plan, Assam, Nagaland, and Jammu & Kashmir received special status (1969-1974).
- Note: On August 5, 2019, the Constitution (Application to Jammu & Kashmir) Order, 2019, was published by the President of India. The unique status granted to Jammu and Kashmir under Article 370 is revoked.
- Five more states were included in the special category between 1974 and 1979. These include Himachal Pradesh, Manipur, Meghalaya, Sikkim, and Tripura.
- The number of states with Special Category status rose to eleven in 1990, with the accession of Arunachal Pradesh and Mizoram. In 2001, the state of Uttarakhand was granted Special Category Status.
Criteria to give the status of Special Category States
The National Development Council bases its decision to give special category designation on the following criteria:
- The state that is struggling with a resource shortage
- The low-income per capita
- State finances are not viable.
- Economic and structural underdevelopment
- The existence of a sizable tribe
- Hilly and challenging terrain
- Border regions that are strategically located
- A sparsely populated area
The National Development Council, which oversees and directs the work of the planning commission, is made up of the prime minister, union ministers, chief ministers, and commission members.
States with Special Category Status
Presently, Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana are among the eleven states in the nation with the special category status.
Telangana, India’s newest state, received this status as a result of being split apart from Andhra Pradesh, which had an adverse financial impact.
Benefits of Special Category Status
- 90% of all state expenditures for all centrally sponsored programs and outside assistance are covered by the central government, and the remaining 10% is given to the state as a zero-interest loan.
- For states in the general category, the typical loan-to-grant ratio is 70% loan and 30% grant.
- Receiving special consideration when applying for government funding.
- Reductions in excise taxes to draw enterprises to the state.
- States in the special category are given 30% of the total federal budget.
- These states have access to programs for debt reduction and debt exchange.
- To entice investment, states with Special Category Status are excluded from excise taxes, customs taxes, corporate taxes, income taxes, and other taxes.
- Unique Category When it comes to receiving central funds, states are given preference, attracting development projects there.
- Unique Category States have the option to carry over any unused funds from one fiscal year to the following without having them expire.
The state administration is encouraged to launch more welfare-oriented programs to promote the overall development of the state as a result of additional funds received from the federal government.
Concerns Related To Special Category Status
- Any new state granted special status may prompt demands from existing states, thereby diluting the benefits. This is a concern related to special category status.
- States are not economically benefited by pursuing special status because the benefits under the current system are meagre.
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.
Instead, it advised the Centre to raise the state’s share of tax receipts from 32% to 42%, which has been in place since 2015. This would help to close the resource gap in each state.
Article Written By: Atheena Fathima Riyas