About:
- Special Category Status used to be granted to some regions that have historically been at a disadvantage compared with the rest of the country.
- Criteria: This decision was taken by the National Development Council (NDC), a body of the former Planning Commission, and was based on various parameters such as: Hilly and difficult terrain, Low population density, Low resource base, Sizable share of tribal Population, Strategic location along the borders of the country etc.
- Benefits for States under SCS: Preferential treatment in getting central funds assistance, Concession on excise duty to attract industries to the state, A significant 30 per cent of the Centre’s gross budget goes to the special category states etc.
Origin of Concept:
- The concept of a special category state was first introduced in 1969 when the 5th Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks.
- Initially three states Assam, Nagaland and Jammu & Kashmir were granted special status. But since then eight more have been included (Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand).
Changes by 14th Finance Commission:
- However, the 14th Finance Commission did away with the ‘special category’ status for states, except for the North-eastern and three hill states (J&K, Himachal Pradesh and Uttarakhand).
- Instead, it suggested that the resource gap of each state 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, the Centre could provide a revenue deficit grant to these states.
- The commission appears to have been guided by the fact that the Constitution never categorised some states as special — treating all of them on an equal footing.
