Know About Special Category Status! The Union Finance Minister emphasized that financial package given to Andhra Pradesh was equivalent to the amount the state would have received had it been given a ‘special category status’. Understanding the basics of ‘special category status’ ‘Special category status’ (SCS) to states is not mentioned anywhere in the constitution. However, the erstwhile National Development Council recognized that some regions in the country were historically disadvantaged in comparison to others. Accordingly, to support these regions SCS was started as a Central Plan Assistance. The SCS was granted to states based on certain criteria:

  • Non-viable nature of state finances
  • Economic and infrastructural backwardness
  • Strategic location along borders with neighboring countries
  • Hilly and difficult terrain
  • Low population density and/or sizeable share of tribal population
Accordingly, in 1969, SCS was given to J&K, Assam, and Nagaland. Eventually, many more states were added to the list: Himachal Pradesh, Sikkim, Manipur, Meghalaya, Mizoram, Arunachal Pradesh, Sikkim, Tripura, and Uttarakhand. Read Also: Tough times for NBFCs The advantage of SCS SCS states receive a variety of benefits and sops, the chief amongst them being that in case of states without SCS, a centrally sponsored scheme receives a contribution of 60% funds from the center and 40% from the states. This ratio changes to 90% contribution from the center and only 10% from states in case of SCS states. What is the current status of SCS? 14th Finance Commission increased the share of states in the divisible pool of central taxes from 32% to 42%. Accordingly, as the states got more untied funds (i.e. funds available without any conditions) to utilize for various programs/schemes, it recommended that there was no need for SCS anymore and accordingly it was to be discontinued/removed. Even the chairperson of 15th Finance Commission has stated that SCS to states is not in the terms of reference of the commission. Reasons cited by FM for not giving SCS to Andhra Pradesh
  • The 14th Finance Commission has recommended removal of SCS status completely.
  • Granting SCS to one state will raise demands from other economically weaker states like Bihar, Odisha, etc
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