Special Category Status

In News

• The Central government made it clear that there is no question of granting special category status to Andhra Pradesh, as it already got a special financial package in lieu of the status.

About

• Andhra Pradesh was given a special package in lieu of the Special Category Status on the request of the State.
• The Centre has the responsibility to fulfill the assurances made in the AP Reorganization Act.

Did the Andhra Pradesh Reorganization Act, 2014, have provisions for special category status to Andhra Pradesh?

• No such mention: The Act, under which the state of Andhra Pradesh was bifurcated in 2014, doesn’t mention ‘special category’, but mentions that the Centre would help Andhra Pradesh bridge any resource gap.
• Revenue Distribution’ section: Under the ‘Revenue Distribution’ section, the Act states that “the Central Government may, having regard to the resources available to the Successor State of Andhra Pradesh, make appropriate grants and also ensure that adequate benefits and incentives in the form of special development package are given to the backward areas of that State.

Significance of the Special Category Status

• More funds: If the special category status provision had survived and had been granted to AP, the state would have received funding for centrally sponsored schemes (CSC) in the 90:10 ratios with 90% of the funds coming from the Centre as against 60% for normal category states.
• Financial benefits: to be extended under the Centrally-sponsored schemes as part of SCS as a special package.

Issues/ Challenges

• 14th Finance Commission recommendation: The Commission did away with the ‘special category’ status for states, except for the North-eastern and three hill states.
  • NDA government which came to power at the Centre in 2014 has been saying that the 14th Finance Commission doesn’t provide for such treatment to Andhra Pradesh.
• The Constitution never mentioned it: The commission appears to have been guided by the fact that the Constitution never categorized some states as special, treating all of them on an equal footing.
• No power to allocate funds: the NITI Aayog, which has replaced the Planning Commission, has no powers to allocate funds. Therefore, the discretion that the ruling party at the Centre had to dole out special favors to states through the Plan panel, no longer exists.

Suggestions

• Early Government: Former PM Manmohan Singh had assured that Andhra Pradesh would be granted special category status.
  • Special Category Status will be extended to the successor state of Andhra Pradesh for a period of five years.
• Tax devolution: Resource gap of each state can be filled through ‘tax devolution’, urging the Centre to increase its share of tax revenues to the states from 32% to 42%.
  • If devolution alone could not cover the revenue gap for certain states, the Commission said, the Centre could provide a revenue deficit grant to these states.
• Externally aided projects: As an additional measure, the Centre has agreed to fund all externally aided projects in Andhra Pradesh in the 90:10 ratios.
• Emotional and sentimental issue in the state: Centre has provided funds for various projects including for the construction of capital city Amaravati and the Polavaram Project under the special assistance measure which makes the bid to get “special status” an emotional and sentimental issue in the state.
• Raising funds through NABARD: The Centre is also willing to accept the state government’s suggestion of raising funds through NABARD.

Source: TH