The concept of a special category state was first introduced in 1969 when the fifth Finance Commission contemplated giving preferential treatment to disadvantaged states. The preferential treatment includes grant of additional fiscal assistance and relief on some central taxes. The special status was granted to Assam, Nagaland, and Jammu & Kashmir. Subsequently, eight more states - Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura, and Uttarakhand - were included in the special status category. As many as 11 states fall under the category. With Andhra Pradesh having been accorded the privilege, the number of states enjoying the status goes up to 12. While the Planning Commission allocates 70 per cent of the Centres gross budget to all the states, the remaining 30 per cent is routed only to the states with the special status tag. One main advantage of special status is states will get funds in the ratio of 90:10 grants versus loans, as opposed to 30:70 for other states under regular funds. This means 90 per cent funds for central-sponsored schemes would come from the Centre for special category states, said Dr DAR Subrahmanyam, professor of economics at Acharya Nagarjuna University (ANU). Special status means complete waiver of excise duty in the state which is at present 16 per cent. Currently, AP is contributing more than Rs 18,000 crore as excise duty and the Centre will have to forego the same after the special status is granted, said a senior official in the finance department. However, states enjoying the tag may face trouble when there is no harmonious relations between the ruling parties in the state and at the Centre as there is no specific criteria for distribution of funds, he pointed out. If the relations between the state and the Centre are strained for political reasons, the Centre could transfer the funds to the state of its preference. During 2013-14, an undivided AP got about Rs 15,000 crore from the Centre under grant-in-aid, which is just about 10 per cent of the total states budget. Interestingly, there are specific guidelines for allocation of grants to other states. These guidelines include population, size of the state, per capita income and fiscal performance among others. According to DB Rao, a retired chief engineer in the public works department, Himachal Pradesh had been facing serious issues in drinking water schemes due to the apathetic response from the Centre in releasing funds. This facility will surely help industries in the residuary state but it could be attractive only when the special status is given for at least for 15 years. As it takes at least three years to kick-start production, relief of five years may not be of any help to industries,
Posted on: Tue, 04 Mar 2014 03:36:12 +0000
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