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Question

The Constitution does not include any provision for categorisation of any State in India as a Special Category Status (SCS) State. Discuss about the future of the special category status.


Solution

Approach:
  1. Explain the concept of the special category states.
  2. Mention about the benefits of getting the status.
  3. Discuss about the present status of the SCS.
  4. Discuss the future of the categorisation.
  5. Make an appropriate conclusion.
Special Category State:
The special category states provides preferential treatment and tax breaks to certain states which faces certain disadvantages. The concept of special category states was introduced by the fifth planning commission in 1969. The decision to grant SCS will be made by the National Development Council headed by the Prime Minister. The factors which are considered for providing the SCS status are
  • Hilly and difficult terrain
  • Low population density or sizeable share of tribal population;
  • Strategic location along borders with neighbouring countries;
  •  Economic       and      infrastructural backwardness;
  • Non-viable nature of state finances.
Benefits of the SCS:
The SCS states has benefits like greater fund devolution and tax holidays. Normal Central Assistance is the main assistance for state plans, is split to favour special category states as the 11 states get 30% of the total assistance while the other states share the remaining 70%. NCA is split into 90% grants and 10% loans for special category states, while the ratio between grants and loans is 30:70 for other states. Special category states also receive specific assistance addressing features like hill areas, tribal sub-plans and border areas. Beyond additional plan resources, special category states can enjoy concessions in excise and customs duties, income tax rates and corporate tax rates as determined by the government.

Present Status of the SCS:
The relevance of the special category status is diminishing after the dissolving the planning commission. Some of the reasons for the situation are
  • Formation of NITI Aayog which has no power on fund devolution.
  • No distinction of SCS by the 14th finance commission.
  • Increase in devolution of funds to state to 42%.
Hence it can be considered that the special category status no longer holds any substance.

Future of the SCS:
The 14th finance commission has clearly mentioned that there will be no distinction between the special category states and general category states in determining norms and recommendations. In the age of the NITI Aayog the SCS will fade away in future course of time and devolution of the funds would be based on the competitiveness of the states.

Conclusion:
There are many states like Andhra Pradesh, Odisha among others which demand for a special category states. In the period of cooperative and competitive federalism giving special treatment will make others to also demand for the same treatment. At the same time the states at real disadvantages should be looked after for their development. The Central Government can provide for arrangements like public private partnership and external multilateral financial mechanism to those states.​​​​​​​

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