TDP, JD(U) seek special status for Andhra, Bihar. Here's how the tag helps

The Lok Sabha elections saw the BJP failing to secure a majority and hence relying on its alliances to stake claim to form a coalition government.

TDP's N Chandrababu Naidu and Bihar Chief Minister Nitish Kumar are vital cogs in this coalition government and have emerged as 'kingmakers' in helping the Prime Minister secure a third straight term.

While Narendra Modi is likely to take the oath as the Prime Minister on June 9, there have been certain demands from key members of the NDA alliance that have surfaced.

The demand for Andhra Pradesh to be given special status has been put on the table by the former Chief Minister of the state.

A special category status for Bihar has also been voiced in the past but has borne no fruits. However, the demand for Andhra Pradesh to be recognised at a special category status may ignite hopes of Bihar also lining up for it.

Nitish Kumar, back in 2005 when he assumed office as Chief Minister of Bihar, highlighted the state's backwardness and poverty, reiterating this demand as recently as November last year during the release of the caste census.

Similarly, Naidu has persistently advocated for special category status for Andhra Pradesh. This demand gained prominence following the state's bifurcation in 2014, which led to a significant loss of revenue.

But, what exactly is a special category status for a state, and how does it benefit it financially, as political leaders keep vying for the tag?

What is special category status?

Special category states (SCS) are designated by the Centre to aid the development of states facing geographical and socio-economic disadvantages.

Although not provided for in the Constitution, this classification was initiated following the recommendations of the 5th Finance Commission.

In 1969, the fifth Finance Commission, led by Chairman Mahavir Tyagi, granted special category state status to Jammu & Kashmir, Assam, and Nagaland based on the Gadgil Formula.

The special category state status was historically granted for plan assistance by the National Development Council of the erstwhile Planning Commission.

Eleven states, which include Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana, have been provided this status.

The newest entry to the list was Telangana as it was formed from Andhra Pradesh.

What are the criteria for receiving special category status?

The parameters for determining special category states, based on the Gadgil Formula, include hilly terrain, low population density, a significant tribal population, strategic location along international borders, economic and infrastructure backwardness, and nonviable state finances.

What are the benefits of special category status?

Previously, SCS states received about 30% of central assistance, calculated by the Gadgil-Mukherjee formula.

However, with the recommendations of the 14th and 15th Finance Commissions and the dissolution of the Planning Commission, this assistance has been incorporated into an increased devolution of funds from the divisible pool, raised to 41% in the 15th Finance Commission.

Special category states receive 90% of the funds required for Centrally-Sponsored Schemes from the Centre, compared to 60% or 75% for other states, with the remaining funds provided by the state governments.

Funds not utilised in a financial year are carried forward, and these states also enjoy significant concessions in excise and customs duties, income tax, and corporate tax.

Apart from all of the above, 30% of the Centre's Gross Budget is allocated to special category states.