Special Category Status

 Special Category Status


·       SCS is a classification given by the Centre to assist development of states that face geographical and socio-economic 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.

·       SCS for plan assistance was granted in the past by the National Development Council of the erstwhile Planning Commission.

·       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.

·       Telangana, the newest State of India, was accorded the status as it was carved out of another state Andhra Pradesh.

·       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%.

·       SCS is different from Special status which imparts enhanced legislative and political rights, while SCS deals with only economic and financial aspects.

·       For instance, J&K used to have Special status before Article 370 was repealed.

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:

1.    The state that is struggling with a resource shortage

2.    The low-income per capita

3.    State finances are not viable.

4.    Economic and structural underdevelopment

5.    The existence of a sizable tribe

6.    Hilly and challenging terrain

7.    Border regions that are strategically located

8.    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.

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.

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.


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