Special category status for Andhra Pradesh, Bihar back in focus as Naidu, Nitish emerge kingmakers

What is Special Category Status?

Introduced in 1969 based on the Fifth Finance Commission's recommendation, Special Category Status (SCS) is a designation by the Central government to aid the development of states with significant socio-economic challenges or geographical disadvantages.

The criteria include difficult terrain, low population density, significant tribal population, strategic location, economic and infrastructural backwardness, and poor state finances. Initially granted to Assam, Jammu and Kashmir, and Nagaland, the list has expanded to include Himachal Pradesh, Manipur, Meghalaya, Tripura, Sikkim, Arunachal Pradesh, Mizoram, Uttarakhand, and more recently, Telangana.

Initially, SCS states received grants according to the Gadgil-Mukherjee formula, which allocated around 30 percent of central assistance to these states. However, after the Planning Commission was abolished and the 14th and 15th Finance Commissions' recommendations were implemented, this assistance was integrated into an increased devolution of funds to all states, raised from 32 percent to 41 percent. Additionally, SCS states benefit from a favourable 90:10 Centre-State funding ratio for centrally-sponsored schemes and various tax concessions.

The demand for Special Category Status remains a contentious issue in Indian politics, with states like Andhra Pradesh and Bihar making strong cases for their inclusion.

Bihar's Demand for Special Category Status

Since Jharkhand was carved out of Bihar in 2000, the state has been seeking SCS. Nitish Kumar has been a prominent advocate for this status since 2006. According to the Centre's 'Multi-dimensional Poverty Index' (MPI) report, Bihar is the poorest state in India, with nearly 52 percent of its population lacking adequate health, education, and living standards. While Bihar meets most of the criteria for SCS, it lacks hilly and geographically difficult terrain.

With a per capita GDP of around Rs 54,000, Bihar remains one of the poorest states. Nitish Kumar had earlier said that SCS would help secure about Rs 2.5 lakh crore needed for welfare measures over the next five years. In November 2023, Kumar's cabinet passed a resolution demanding SCS for Bihar, following a caste-based survey revealing 94 lakh poor families. He had even threatened to launch a state-wide movement if the Centre does not grant SCS to Bihar promptly.

History of Andhra Pradesh's SCS issue

The demand for SCS for Andhra Pradesh stems from the bifurcation of the state in 2014, which led to significant economic challenges for the residual state. During the bifurcation discussions, then Prime Minister Manmohan Singh assured special status to Andhra Pradesh for five years. This status was meant to provide additional central assistance, tax concessions, and other financial benefits to foster economic growth.

Successive governments and political parties have reiterated the promise of special status, making it a crucial electoral issue. Initially, the BJP and TDP alliance promised special status but later offered a special financial package instead, leading to political friction and the breakup of the alliance. Public sentiment in Andhra Pradesh sees special status as essential for the state's development.

In the 2019 elections, YSRCP's Jagan Mohan Reddy won decisively, banking on the SCS issue. He criticised Naidu for failing to secure SCS for the state and accused the BJP of not fulfilling its promise. This led to the TDP severing ties with the BJP-led NDA government in 2018.

Nara Lokesh, TDP General Secretary and Naidu's son, during an interaction with the press on June 7, re-asserted the party's 100 percent support for the SCS for Andhra Pradesh.

"Our support is unconditional. As far as special status is concerned, we need to understand that the state of Andhra Pradesh in 2014 was bifurcated against the majority view of people of Andhra Pradesh. And one of the major reasons was the loss of Hyderabad. Hyderabad is the economic powerhouse and a lot of people depend on it. So they wanted sort of special dispensation to be given to the state so that we can rebuild".

"I understand that there will always be constraints, therefore we look forward to working together and creating a very conducive environment where investments will come into the state...We have to create jobs both in the private & public sectors. So I look forward to working with the NDA government to do this", he further noted.

How SCS will benefit Bihar, Andhra Pradesh

Special Category Status (SCS) would bring significant financial benefits to Andhra Pradesh and Bihar, providing them with more central funds. For instance, the per capita grants to SCS states amount to Rs 5,573 crore per year, while Andhra Pradesh currently receives only Rs 3,428 crore.

Both state governments argue that these special incentives are crucial for the rapid industrialisation of their primarily agrarian economies and would create more employment opportunities for the youth. Additionally, SCS would stimulate investments in specialty hospitals, five-star hotels, manufacturing industries, high-value service industries such as IT, and premier institutions of higher education and research.