The rationale for special status is that certain states, because of inherent features, have a low resource base and cannot mobilize resources for development.
Some of the features required for special status are: hilly and difficult terrain; low population density or sizeable share of tribal population; strategic location along borders with neighboring countries; economic and infrastructural backwardness; and nonviable nature of state finances.
The decision to grant special category status lies with the National Development Council, composed of the Prime Minster, Union Ministers, Chief Ministers and members of the Planning Commission, who guide and review the work of the Planning Commission. The NITI Aayog, which has replaced the Planning Commission, has no power to allocate funds — therefore, the discretion that the ruling party at the Centre had to dole out special favors to states through the Plan panel, no longer exists.
Advantages of Special Category Status are:
Preferential treatment in federal assistance and tax break
Significant excise duty concessions
Significant 30% of the Centre’s gross budget goes to the Special category state
Centre pays 90 per cent of the funds required in a centrally-sponsored scheme to special category states as against 60 per cent in case of normal category states
As per the 14th Finance Commission’s recommendations, Central plan assistance to SCS States has been subsumed in an increased devolution of the divisible pool to all States (from 32% in the 13th FC recommendations to 42%) and do not any longer appear in plan expenditure.
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