Bihar Cabinet nod to seek special status for State

  • November 23, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Bihar Cabinet nod to seek special status for State

Subject: Polity

Section: Federalism

Context:

  • The Bihar Cabinet passed a resolution on Wednesday requesting the Centre to grant special category status to the State, days after CM Nitish Kumar threatened to launch a movement if the demand remains unfulfilled.

What is Special Category Status (SCS)?

  • SCS is a classification given by the Centre to assist development of states that face geographical and socio-economic disadvantages.
  • The 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  • For instance, J&K used to have Special status before Article 370 was repealed.

Parameters (Based on Gadgil Formula):

  • Hilly Terrain;
  • Low Population Density and/or Sizeable Share of Tribal Population;
  • Strategic Location along Borders with Neighbouring Countries;
  • Economic and Infrastructure Backwardness; and
  • Nonviable Nature of State finances.

What are the Benefits of Special Category Status?

  • The Centre pays 90% of the funds required in a centrally-sponsored scheme to special category status states as against 60% or 75% in case of other states, while the remaining funds are provided by the state governments.
  • Unspent money in a financial year does not lapse and is carried forward.
  • Significant concessions are provided to these states in excise and customs duties, income tax and corporate tax.
  • 30% of the Centre’s Gross Budget goes to Special Category states.

What are the Concerns regarding Special Category Status?

  • It causes Increased burden on Central Finances.
  • Spillover Effect: Giving special status to a state leads to demands from other states too. For instance, demands from Andhra Pradesh, Odisha and Bihar.
Bihar Cabinet nod to seek special status for State Polity