Special Category Status (SCS) for Andhra Pradesh
Context
The demand for Special Category Status (SCS) for Andhra Pradesh has resurfaced prominently in political discussions.
- The debate initiated during the bifurcation of the state in 2014, remains unresolved.
- This renewed focus on SCS comes amid the broader backdrop of financial and developmental challenges faced by the state.
- As the political landscape evolves, understanding the intricacies of this demand and its implications becomes essential.
Relevance:
GS-02 (Polity)
Dimensions of the Article:
- The Background
- What is Special Category Status?
- Key Features of SCS
- Why Does Andhra Pradesh Not Qualify for SCS?
- Its Significance for Andhra Pradesh
- About the Special Package
The Background
- The Andhra Pradesh Reorganisation Act of 2014, which bifurcated the unified Andhra Pradesh into two separate states—Andhra Pradesh and Telangana—did not explicitly grant SCS to the new Andhra Pradesh.
- However, during a debate in the Rajya Sabha on February 20, 2014, then-Prime Minister Manmohan Singh indicated that SCS would be extended to Andhra Pradesh for five years, a sentiment seconded by BJP leader M. Venkaiah Naidu.
- When the National Democratic Alliance (NDA) led by Prime Minister Narendra Modi came to power, the promise of SCS for Andhra Pradesh was sidelined. The argument was that Andhra Pradesh did not meet the criteria for SCS and the Planning Commission, which previously managed SCS, had been dissolved.
- The 14th Finance Commission equated SCS with general category status, effectively nullifying the provision for new states.
What is Special Category Status?
- Special Category Status (SCS) is a classification granted by the central government to states that face unique socio-economic and geographical challenges.
- The concept was introduced by the Fifth Finance Commission in 1969 to support states with specific disadvantages such as hilly terrain, low population density, significant tribal populations, strategic international borders, economic and infrastructural backwardness, and unviable state finances.
Key Features of SCS:
- Financial Assistance: SCS states receive more favorable financial assistance from the Centre, including 90% of the funds for centrally-sponsored schemes, as opposed to 60% or 75% for general states.
- Tax Concessions: SCS states benefit from various tax concessions, including excise, customs duties, income tax, and corporate tax.
- Unspent Funds: Funds that remain unspent in a financial year are carried forward to the next year.
- Increased Devolution: The 14th and 15th Finance Commissions increased the devolution of the divisible pool funds to all states, including SCS states, to 42% and 41% respectively.
- Currently, states with SCS include Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana
Why Does Andhra Pradesh Not Qualify for SCS?
- Andhra Pradesh does not qualify for SCS based on the established criteria. The key benchmarks include:
- Hilly Terrain: Andhra Pradesh does not predominantly consist of hilly terrain.
- Low Population Density: The state does not have a low population density.
- Strategic Location: It does not share significant international borders.
- Tribal Population: While there are tribal populations, they do not constitute a majority.
- Economic Backwardness: Despite facing financial challenges post-bifurcation, it does not meet the stringent criteria of economic and infrastructural backwardness set for SCS.
- Moreover, the 14th Finance Commission’s recommendations led to the annulment of the SCS category for new states, focusing instead on increased tax devolution and revenue deficit grants to address financial disparities.
Its Significance for Andhra Pradesh
- Special Category Status holds significant potential benefits for Andhra Pradesh, which has been grappling with financial constraints since bifurcation.
- The state has a substantial revenue deficit and mounting debt.
- The construction of a new capital, Amaravati, and stalled developmental projects require substantial funding.
- SCS would provide much-needed financial aid, tax concessions, and preferential treatment in centrally-sponsored schemes, potentially accelerating development and stabilizing the state’s economy.
About the Special Package
In the absence of SCS, the central government offered Andhra Pradesh a Special Package (SP) in 2014. The SP included:
- National Project Status for Polavaram Irrigation Project: Full funding by the central government.
- Tax Concessions and Special Assistance: Similar to those available under SCS but without the formal status.
- Chandrababu Naidu, the then Chief Minister of Andhra Pradesh, initially accepted the SP. However, this decision was heavily criticized by opposition parties, including the Yuvajana Sramika Rythu Congress Party (YSRCP), as a betrayal of the state’s interests. In 2018, Naidu withdrew from the NDA alliance and moved a no-confidence motion against the central government, emphasizing the unmet demand for SCS.
Way Forward
The demand for Special Category Status remains a contentious issue. Here are potential steps forward:
- Re-evaluation by Finance Commission: The Union Government can refer the matter to the 16th Finance Commission and the NITI Aayog for re-evaluation.
- Increased Financial Assistance: Beyond SCS, the Centre can consider increasing financial assistance through other mechanisms to support Andhra Pradesh’s development.
- Political Negotiation: Given the current political dynamics, with TDP part of the NDA alliance again, there may be an opportunity for Andhra Pradesh to negotiate for better financial terms.
- Focus on Development Projects: Prioritizing and fast-tracking key developmental projects, especially infrastructure and capital development, can significantly aid the state’s growth.
- Addressing Revenue Deficit: Implementing strategies to boost revenue generation within the state, along with targeted central assistance, can help manage the fiscal deficit.
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