As the nation gears up for PM Modi’s oath taking ceremony, various speculations are circulating in political circles regarding potential demands from BJP’s allies. One such demand, which may be presented by NDA partners, particularly the Janata Dal United (JD(U)) and the Telugu Desam Party (TDP), is for ‘Special Category Status’ (SCS).
Chandrababu Naidu has been vocal about SCS since 2017 following the bifurcation of Andhra Pradesh, hoping it would provide the necessary funds to establish Amravati as the state capital. Odisha has also made similar demands in the past. Even Nitish Kumar has dropped several hints to get a Special Status Category for Bihar. But what exactly is a Special Status Category and what are the benefits that come with it.
Special Category Status (SCS) is designated to states to boost their growth if they are underdeveloped. This status is granted to enhance their growth rate when they encounter geographical and socio-economic disadvantages. Although the Constitution does not originally provide for granting a special status to a state for its overall development, a provision was later established for awarding Special Category Status based on the recommendations of the Fifth Finance Commission in 1969.
The special status category was introduced in 1969, based on the recommendations of the Fifth Finance Commission, to support certain underdeveloped states with hilly terrains, strategic international borders, and economic and infrastructural challenges. In 2023, former Union minister Giridhari Yadav informed Parliament that the Special Category Status for plan assistance had been previously granted by the National Development Council (NDC) to some states that exhibited specific characteristics requiring special consideration.
According to a leading publication, Bihar’s per capita net state domestic product for 2022-23 was ₹31,280, one of the lowest in the country. The National Family Health Survey 5 also identified Bihar as India’s poorest state, with 33.76 percent of its population being multidimensionally poor.
In 2023, S Siddharth, then the Additional Chief Secretary of Bihar, stated that ₹2.5 lakh crore is needed to provide land to the landless and houses to homeless families. He told news agency ANI that obtaining such a substantial amount would require the state to be granted special status to expedite the process.
After its bifurcation in 2014, Andhra Pradesh has also seen many of its political leaders demanding a Special Category Status on the grounds of revenue loss due to the city of Hyderabad going to Telangana.
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States can only get a special category status only if has a hilly terrain, a low population density or a significant tribal population, a strategic location along borders with neighboring countries, is economically and infrastructurally backward, and has nonviable state finances.
If a state is granted the ‘Special Category Status’, the Central government must provide 90 percent of the funds for implementing centrally-sponsored schemes, compared to 60 percent or 75 percent in other states. The state contributes the remaining funds.
Unused allocated funds do not expire and can be carried forward. Special Category states also receive substantial exemptions in taxes and duties, including customs, income tax, and corporate tax. Additionally, 30 percent of the Centre’s Gross Budget is allocated to Special Category states.
Jammu and Kashmir (now a Union Territory after the revocation of Article 370), Assam, and Nagaland were the first states awarded special status in 1969. Later, eleven states, including Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana, received special category state status. Telangana was granted this status after being carved out of Andhra Pradesh when the bill was passed by Parliament on February 18, 2014, under the Congress-led UPA government.
The 14th Finance Commission eliminated the ‘special category status’ for states, except for the Northeastern and three hill states, and recommended addressing the resource gap in these states through tax devolution, increasing it from 32% to 42%. Special Category State status is different from Special status, which grants enhanced legislative and political rights. SCS pertains only to economic and financial aspects.
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