Nageshwar Patnaik in Bhubaneswar, May 22, 2019: Andhra Pradesh, Bihar, Odisha and Telengana once again have raked up their demands of special category status (SCS) for them. The leaders are expecting a hung Lok Sabha and hence are all out to grab the opportunity to get their demands fulfilled.

The regional satraps are contemplating a scenario where the NDA comes short of the majority mark. If that happens, their demands for special status in Bihar, Odisha, Telangana and Andhra Pradesh could become the crucial move for government formation after May 23.

However, the 14th Finance Commission, tabled in Parliament in February 2015, has done away with the distinction between states with SCS and others. The Narendra Modi led NDA government has made it clear that this meant SCS had ceased to exist so there was no question of granting these states SCS status. The 14th FC had recommended a higher share of taxes – 42% instead of 32% – for states and revenue-deficit grants for those states in need.

Keeping this in view, it will be a real test for the next government whether to concede to the demands for declaration of four more SCS states or come out with some alternative packages to soothe the feeling of the leaders from these state.

The concept of a special category state came into being in 1969 when the Gadgil- Mukherjee (the 5th Finance Commission aiming to provide central assistance and tax breaks to disadvantaged states) formula was approved. There is no provision of SCS in the Constitution; the Central government extends financial assistance to states that are at a comparative disadvantage against others.

Initially, Assam, Nagaland, and Jammu & Kashmir were granted the status. Eight other states were added in the following years (Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura, and Uttarakhand), with Uttarakhand being the last to be granted this status in 2010.

Special Category Status for plan assistance has been granted in the past by the National Development Council (NDC) to some Sates that are characterized by a number of features like (i) hilly and difficult terrain, (ii) low population density and / or sizeable share of tribal population, (iii) strategic location along borders with neighbouring countries, (iv) economic and infrastructural backwardness and (v) non-viable nature of state finances.


SCS meant more funds as the Centre contributes 90% of the funds for centrally sponsored schemes, instead of the 60% it gives to other states as well as tax incentives.

It is true that all special category state were born with severe disadvantages inherited from their history and geography characterized by scarcity of natural resources, low income, low growth and heavy dependence on agriculture.

But these facts do not deter regional satraps to pitch for SCS. After Cyclone Fani which became the fourth major storm to ravage the state of Odisha in the last five years, Odisha Chief Minister Naveen Patnaik again raised the bogey for special category status (SCS) for the state. This makes Patnaik the latest in a string of Chief Ministers who have raised the demand for SCS along with Nitish Kumar of Bihar, N Chandrababu Naidu of Andhra Pradesh and K Chandrashekar Rao of Telangana.

The ruling BJD has said it is open to support any party or coalition at the Centre that supports Odisha’s legitimate demands, including special category status for the state. Patnaik has been consistently demanding special category status for Odisha citing the underdevelopment of the state in many respects.

In a letter to Prime Minister, Narendra Modi on the subject in January this year Patnaik said, “It is a fact that Odisha remains at the bottom in the country in most central subjects like tele-density, railway network, banking network and coverage, national highway and air connectivity. It is in this premise of historical central neglect and frequent natural calamities that my government has been demanding special category status for Odisha……”

The special category status demand tops BJD’s agenda when the party negotiates with the next government at the Centre if the NDA finds it short of majority. In the event of negotiations with a BJP-led government, which is more likely, this could become a major stumbling block.

Among the regional players in Andhra Pradesh, there is political consensus on the demand for SCS since they claim the state’s economy took a hit after the former capital of Hyderabad went to Telangana in the bifurcation.

While the Manmohan Singh government had announced a special package for Telangana, the setting up of the NITI Aayog by the Modi government took away the discretionary power of the ruling party at Centre to grant SCS to a state.

Jagan Mohan Reddy of the YSR Congress then announced that after the 2019 Lok Sabha polls, he would support whichever party gave special status to Andhra Pradesh. This prompted TRS leader T Harish Rao to say if Andhra Pradesh received special status, so should Telangana.

In 2015, the JD (U)-RJD alliance had made special status a key issue in the assembly elections. After the JD (U) came into the NDA fold, it kept quiet for sometimes. But now it has again raised the issue of SCs status to Bihar saying that it would support the Front which will accord SCS status to the state.

The mechanism of special category status devised to address the genuine problems of a state appears flawed as it failed to address their deep-rooted structural weaknesses and lacked coherent strategy. The SCS status to 11 states has them overwhelmingly dependent on central funding, unable to negotiate the future on their own strength. It is time to have a relook at the issue and instead work out strategy to empowering these peripheral, marginalized states and bringing them within the folds of the mainstream.

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