Factors behind not granting Andhra special category status

The Centre was almost prepared to grant the Special Category Status (SCS) to Andhra Pradesh but two factors dissuaded it from going ahead —outcry from nine more States for the same tag and NITIAayog too ruled it out citing the 14th Finance Commission report that had made it clear that it would not make any distinction between special and general category States.

Venkaiah Naidu (Union Information and Broadcasting Minister) explaining the above context

“Till the end, my argument was the same before the Prime Minister Narendra Modi and the Finance Minister, ArunJaitley. When we are prepared to give thousands of crores more through other means why not SCS.

Finance Commission Report

The class of SCS would cease to exist going by the Commission report. Quoting from its report, he said it took into account disabilities arising out of constraints unique to each state to arrive at expenditure needs and recommended filling of resource gaps mainly through increased tax devolution. Where devolution was not able to cover the assessed gap, it had recommended post-devolution grants for revenue deficit and the Centre has agreed to take that responsibility in the case of AP spread over five years.

What is Special Category Status?
Initially, three states namely Assam, Nagaland and Jammu & Kashmir were accorded special category status and later on eight other states were also given special category status namely: Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Uttarakhand, Tripura, Himachal Pradesh, and Sikkim and thus the list is now increased to eleven.

The basis whether a State should be accorded special status or not includes: hilly and difficult terrain; low population density and or sizeable share of tribal population; strategic location along borders with neighboring countries; economic and infrastructure backwardness and non-viable nature of state finances.

At the time of resource allocation by the centre to States, these special category States are at a beneficial position. The Finance Ministry allocates funds to states through central assistance for state plans. Central assistance can be broadly split into three components: Normal Central Assistance (NCA), Additional Central Assistance (ACA) and Special Central Assistance.

Normal Central Assistance favours special category states and they get 30% of the total assistance while the other states share the remaining 70%. NCA is in the form of 90% as grants and 10% loans for special category states, while the ratio between grants and loans is 30:70 for other states. There is no fixed formula for Special Central Assistance and it depends on the basis of the state’s plan size and previous plan expenditures. Besides this, special category states enjoy concessions in excise and customs duties, income tax rates and corporate tax rates as determined by the government.