Centre in talks with J&K, Ladakh on special status

Syllabus subtopic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

Prelims and mains focus: about the ‘special status’ and how is it different from ‘special cateogory status’; benefits associated with them

News: The Ministry of Home Affairs (MHA) is holding consultations with the Union Territories of Jammu and Kashmir (J&K) and Ladakh to grant them “special status” on the lines of Article 371 of the Constitution, a senior government official said.

Background:

Jammu and Kashmir enjoyed a special status as per Article 370 and also Special Category Status. But now that Article 35A has been scrapped and it has become a union territory with legislature, SCS doesn't apply to J&K anymore.

People in Leh and Ladakh were initially very happy and by and large welcomed the announcement of the Union Territory as opposed to the people of Kargil. However, that initial euphoria is now giving way to a lot of apprehension, fear and disenchantment, if they are not able to protect and safeguard their resources or their unique cultural identity.

Where is Article 317 applicable?

The said provision is applicable in States of Maharashtra, Gujarat, Nagaland, Assam, Manipur, Goa, Andhra Pradesh, Sikkim, Arunachal Pradesh and Karnataka to protect their unique cultural identity and economic interest.

In Maharashtra and Gujarat, the provision enables separate ‘boards’ in certain areas for “equitable allocation of funds for developmental work” and “adequate opportunity for employment in service under the control of the State government.”

The proposal is still at a consultation stage. The Centre has sought response from the two UTs.

Meaning and history of the term SCS

SCS is a classification given by Centre to assist in the development of those states that face geographical & socio-economic disadvantages like hilly terrains, strategic international borders, economic & infrastructural backwardness and non-viable state finances.

1. Introduced in 1969.
2. 5th Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks.
3. National Development Council grants the status of Special Category States.
4. Initially three states Assam, Nagaland and Jammu & Kashmir.
5. Since then eight more have been included – Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand.
6. Direct transfers subsequently abolished in 2013–14.
7. In 2013, Centrally Sponsored Schemes (CSS) were restructured into 66 schemes, including 17 flagship programmes with significant outlays.
8. In 2016, CSS restructured into only 28 schemes.
9. From 2017–18, the distinction between plan and non-plan expenditure removed,
10. Therefore the Gadgil formula is a thing of the past

What is Special Category Status to states and how is it different from Special Status?

Special Category Status (SCS) is a classification given by Centre to assist in the development of those states that face geographical and socio-economic disadvantages like hilly terrains, strategic international borders, economic and infrastructural backwardness, and non-viable state finances.

Historical background

The concept of a special category status was first introduced in 1969 when the fifth Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks, establishing special development boards, reservation in local government jobs, educational institutions, etc.

This formula was named after the then Deputy Chairman of the Planning Commission, Dr Gadgil Mukherjee and is related to the transfer of assistance to the states by centre under various schemes.

Initially, three states; Assam, Nagaland and Jammu & Kashmir were granted special status but from 1974-1979, five more states were added under the special category. These include Himachal Pradesh, Manipur, Meghalaya, Sikkim and Tripura.

In 1990, with the addition of Arunachal Pradesh and Mizoram, the states increased to 10. The state of Uttarakhand was given special category status in 2001.

But after the dissolution of the planning commission and the formation of NITI Aayog, the recommendations of the 14th Finance Commission were implemented which meant the discontinuation of the Gadgil formula-based grants.

The 14th Finance Commission effectively removed the concept of special category status after its recommendations were accepted in 2015.

The rationale for special status is that certain states, because of inherent features, have a low resource base and cannot mobilize resources for development.

Who grants special status to states?

The decision to grant special category status lies with the National Development Council, composed of the prime minister, union ministers, chief ministers and members of the planning commission, who guide and review the work of the commission.

Special category status for plan assistance has been granted in the past by the National Development Council (NDC) to some states that are characterized by a number of features necessitating special consideration.

Criteria for special category status:

1. Hilly and difficult terrain
2. Low population density or sizeable share of tribal population
3. Strategic location along borders with neighbouring countries
4. Economic and infrastructural backwardness
5. Non-viable nature of state finances

Can special category status be granted to more states now?

In the present scenario, it is believed that no more states can be given the status of a special category state.

The Constitution of India does not include any provision for the categorization of any state in India as a 'special category state.

However, a wide range of provisions are available to as many as 10 states that have been listed under Articles 371, 371-A to 371-H, and 371-J.

Some of these states are Maharashtra and Gujarat, Nagaland, Assam, Manipur, Andhra Pradesh, Sikkim, Mizoram, Arunachal Pradesh and Telangana and Goa. (Art 371I deals with Goa, but does not include any provision that can be termed 'special'.)

While these set of provisions were incorporated into the Constitution by Parliament through amendments under Article 368, Articles 370 and 371 have been part of the Constitution from the time of its commencement on January 26, 1950.

Why these special provisions?

The intention behind these provisions is to safeguard the interest and aspirations of certain backward regions or to protect cultural and economic interests of the tribal people or to deal with the disturbed law and order in some parts.

Benefits states confer with special category status:

States which are granted special category status enjoy several benefits.

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.

What is the difference between special category status and special status?

1. The constitution provides special status through an Act that has to be passed by 2/3rds majority in both the houses of Parliament whereas the special category status is granted by the National Development Council, which is an administrative body of the government.
2. For example, Jammu and Kashmir enjoyed a special status as per Article 370 and also special category status. But now that Article 35A has been scrapped and it has become a union territory with legislature, special category status doesn't apply to J&K anymore.
3. Special status empowers legislative and political rights while special category status deals only with economic, administrative and financial aspects.

Which states have been demanding special category status

1. Andhra Pradesh
2. Bihar
3. Goa
4. Odisha
5. Rajasthan