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Special category status

Topics Covered:Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Special category status

What to study?

For Prelims: SCS- features, implications and criteria.

For Mains: Significance, the need for and concerns associated.

Context: Andhra Pradesh has revived its demand for Special Category Status (SCS).


It was the bifurcation promise and 15th Finance Commission report that stated that ‘grant of SCS lies in the hands of the Centre’. SCS was promised to Andhra Pradesh by the then Congress government at the Centre in 2014, at the time of bifurcation which resulted in the formation of Telangana. The then Opposition party BJP too agreed to it and even stated that SCS would be extended by five more years if it was voted to power.

What is Special Category Status?

There is no provision of SCS in the Constitution; the Central government extends financial assistance to states that are at a comparative disadvantage against others. The concept of SCS emerged in 1969 when the Gadgil formula (that determined Central assistance to states) was approved.


Some prominent guidelines for getting SCS status:

  1. Must be economically backward with poor infrastructure.
  2. The states must be located in hilly and challenging terrain.
  3. They should have low population density and significant tribal population.
  4. Should be strategically situated along the borders of neighboring countries.

Benefits states confer with special category status:

  1. The central government bears 90 percent of the state expenditure on all centrally-sponsored schemes and external aid while rest 10 percent is given as loan to state at zero percent rate of interest.
  2. Preferential treatment in getting central funds.
  3. Concession on excise duty to attract industries to the state.
  4. 30 percent of the Centre’s gross budget also goes to special category states.
  5. These states can avail the benefit of debt-swapping and debt relief schemes.
  6. States with special category status are exempted from customs duty, corporate tax, income tax and other taxes to attract investment.
  7. Special category states have the facility that if they have unspent money in a financial year; it does not lapse and gets carry forward for the next financial year.

Other benefits:

Besides tax breaks and other benefits, the State with SCS will get 90% of all the expenditure on Centrally sponsored schemes as Central grant. The rest of the 10% will also be given as a loan at zero per cent interest. Usually, the ratio for general category States is 70% loan and 30% grant.

When was the first Special Category status bestowed?

First SCS was accorded in 1969 to Jammu and Kashmir, Assam and Nagaland. Over the years, eight more states were added to the list — Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and, finally, in 2010, Uttarakhand. Until 2014-15, SCS meant these 11 states received a variety of benefits and sops.

Concerns associated:

Considering special status to any new State will result in demands from other States and dilute the benefits further. It is also not economically beneficial for States to seek special status as the benefits under the current dispensation are minimal. Therefore, States facing special problems will be better off seeking a special package.

Sources: the Hindu.