Issues with Special Category State Status


Author: Parveen Kaswan (Follow)


If People are able to recall than there was a rally some weeks ago in Bihar named as Adhikaar Rally. The main purpose of the rally held was to demand a special category status for Bihar to touch the national average on several indicators of human development index, economic growth and development.  Whether the demand of a special state for Bihar is right or wrong it is a matter of further detail, but as a fact even lots of the people don’t know what is the meaning of special state provision and what difference this status is going to make.

Map of India

Map of India

In 1969 while devising formula for sharing central assistance among states, the Fifth Finance Commission acting in line to the Gadgil formula, had accorded special status to three states on the basis of harsh terrain, backwardness and social problems prevailing in these states. As per Gadgil formula a special category state gets preferential treatment in federal assistance and tax breaks. The special-category states get significant excise duty concessions, and thus help these states attract large number of industrial units to establish manufacturing facilities within their territory. Now  states categorized under this term are:- Arunachal Pradesh(S22), Assam(S23), Himachal Pradesh(S2), Jammu and Kashmir(S1), Manipur(S25), Meghalaya(S27), Mizoram(S26), Nagaland(S24),Utrakhand(S4),Sikkim(S21),Tripura(S28) . For such states, in the past, 90 per cent of Central assistance was treated as a grant, the remaining 10 per cent as a loan. They are given a higher share of the Union government’s resource allocation because of harsh terrain, backwardness and other social problems. All of them also happen to be border states. Bihar wants to be the 12th state to get this status.

For special category states unlike other states there is no hard budget constraint as the central transfer is high. Through the enactment of FRBM these states are also availing themselves of the benefit of debt swapping and debt relief schemes which facilitate reduction of the average annual rate of interest. There is a necessity of developing all these states at par with other states.

The formation and division of states on the basis of these parameters is very good as it helps those states which have low financial capacity to overcome their social, economic and other problems in such a good manner and this ultimately benefits the people of that region but we have to keep in mind that if a large, mainstream state is given special treatment, the meaning of special should not blur.

Post By Parveen Kaswan (65 Posts)

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