Central Idea

Recently, Bihar govt passed a resolution seeking Special Category Status (SCS) for the state.
This demand comes in light of the revelations from the “Bihar Caste-based Survey, 2022,” which unveiled that nearly one-third of Bihar’s population continues to grapple with poverty.

Special Category Status (SCS): An Overview

Definition: SCS is a classification conferred by the Central government to support the development of states facing geographical or socio-economic disadvantages.
Origins: SCS was instituted in 1969, based on the recommendations of the 5^th Finance Commission (FC).
Criteria: Five criteria are assessed before granting SCS, including factors like hilly terrain, low population density, and economic backwardness.
Historical Allocation: Initially, three states—Jammu & Kashmir, Assam, and Nagaland—were granted SCS. Subsequently, eight more states, including Himachal Pradesh and Uttarakhand, received this status.

Financial Assistance: SCS states used to receive grants based on the Gadgil-Mukherjee formula, accounting for approximately 30% of total central assistance.
Devolution of Funds: Post the abolition of the Planning Commission and the recommendations of the 14th and 15th FCs, SCS assistance has been subsumed into increased devolution of funds for all states (now 41% in the 15th FC).
Funding Ratio: SCS states enjoy a favourable 90:10 Centre-State funding split for centrally sponsored schemes, compared to 60:40 or 80:20 for general category states.
Additional Incentives: SCS states receive concessions in customs and excise duties, income tax rates, and corporate tax rates to attract investments.

Resource Challenges: Bihar attributes its poverty and underdevelopment to limited natural resources, irregular water supply for irrigation, recurring floods in the north, and severe droughts in the south.
Industrial Shift: The state’s bifurcation led to the relocation of industries to Jharkhand, creating unemployment and investment voids.
Per-Capita GDP: Bihar’s per-capita GDP, at around ₹54,000, consistently ranks among the lowest in India.
Welfare Funding: Chief Minister Nitish Kumar asserts that Bihar houses approximately 94 lakh poor families and that SCS recognition would generate about ₹2.5 lakh crore, crucial for funding welfare initiatives over the next five years.

Andhra Pradesh: Since its bifurcation in 2014, Andhra Pradesh has sought SCS due to revenue loss post-Hyderabad’s transfer to Telangana.
Odisha: Odisha’s appeal for SCS underscores its vulnerability to natural disasters, such as cyclones, and a significant tribal population (around 22%).
Central Government’s Response: Despite these demands, the Central government, citing the 14th Finance Commission’s report, which recommended against granting SCS to any state, has consistently rejected them.

Criteria Fulfillment: Bihar meets most SCS criteria but lacks hilly terrain and geographically difficult areas, crucial for infrastructural development.
Alternative Solutions: In 2013, the Raghuram Rajan Committee proposed a ‘multi-dimensional index’ methodology instead of SCS, which could be revisited to address Bihar’s socio-economic challenges effectively.