Note4Students
From UPSC perspective, the following things are important :
Prelims level: Special Category Status
Why in the News?
The Nitish Kumar government in Bihar renewed its demand for Special Category Status (SCS) before the 16th Finance Commission, which is currently touring the state.
About Special Category Status (SCS)
- Special Category Status (SCS) is a classification granted to specific states in India facing geographical, socio-economic, and infrastructural challenges.
- It provides special financial assistance for their development.
- Evolution of SCS:
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- Introduced in 1969 following the recommendations of the Fifth Finance Commission, based on the Gadgil formula for fund allocation.
- Initially granted to Assam, Jammu & Kashmir, and Nagaland, with other states like Himachal Pradesh, Manipur, Uttarakhand, and Telangana added later.
- Eligibility Criteria (Based on the Gadgil Formula): States must meet at least one of the following:
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- Hilly terrain: Challenging geography impeding development.
- Low population density or a large tribal population.
- Strategic location near international borders.
- Economic and infrastructural backwardness.
- Non-viable state finances: Financial instability due to lack of resources.
- Benefits of SCS:
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- Financial Assistance: 90% grants for centrally sponsored schemes (vs. 30% for non-SCS states).
- Special Plan Assistance: Additional funds for national importance projects.
- Tax Benefits: Concessions on excise, income, and corporate taxes (many subsumed under GST).
- Carry-Forward of Unspent Funds: Funds are carried forward to the next year.
- Higher Budget Allocation: 30% of the Centre’s budget allocated to SCS states.
Assessment of Bihar’s Demand:
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About the Finance Commission
- The Finance Commission is created every 5 years to allocate financial resources from the Centre to states, based on Article 280 of the Constitution.
- Composition: Consists of a chairman and four other members appointed by the President.
- Qualifications: Members must have specialized knowledge in finance, economics, accounts, or administration.
- The Fifteenth Finance Commission’s recommendations are valid till 2025-26.
- Terms of Reference for 16th FC: Division of tax proceeds, principles for grants-in-aid, enhancing state funds for local bodies, and evaluation of disaster management financing.
PYQ:[2023] Consider the following:
For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance? (a) Only two |
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