Special Category Status

2023 FEB 23

Preliminary   > Polity   >   Miscellaneous   >   Centre-State Finance

Why in news?

  • Recently, Union Finance Minister made it clear that the Centre will not consider demands for “special category status” for any state as the 14th Finance commission has clearly said no special status can be given.
  • This comes as a blow to states like Odisha, Bihar, Andhra Pradesh which have been pushing for it for some years now.

About Special Category Status:

  • SCS is a classification given by the Centre to assist development of states that face geographical and socio-economic disadvantages.
  • Constitution does not make a provision for SCS and this classification was later done on the recommendations of the Fifth Finance Commission in 1969.
    • Status was first accorded to Jammu and Kashmir, Assam and Nagaland in 1969.
    • Later it was extended to eight more states - Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand.
  • SCS for plan assistance was granted in the past by the National Development Council of the erstwhile Planning Commission. Now, it is done by the central government.

Parameters (Based on Gadgil Formula):

  • Hilly Terrain.
  • Low population density and/or sizeable share of tribal population;
  • Strategic location along borders with neighbouring countries;
  • Economic and infrastructure backwardness; and
  • Non-viable nature of state finances.

Benefits of Special Category Status:

  • The Centre pays 90% of the funds required in a centrally-sponsored scheme to special category status states as against 60% or 75% in case of other states, while the remaining funds are provided by the state governments.
  • Unspent money in a financial year does not lapse and is carried forward.
  • Significant concessions are provided to these states in excise and customs duties, income tax and corporate tax.
  • 30% of the Centre’s Gross Budget goes to Special Category states.


Consider the following statements:

1. 15th Finance Commission recommended to done away with ‘special category status’ to states.

2. Part VI of the Constitution of India mentions about special category status’ to states.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2