News Excerpt:
Internal discussions within the government suggest that the demand for special category status by the BJP’s two key allies, TDP and JD(U) for Andhra Pradesh and Bihar, respectively, will be hard to meet since there are several states which may need a higher percentage of grants given their socio-economic and fiscal health.
Special Category Status and Funding Pattern:
- Earlier, special category states received 90% of centrally sponsored scheme funds from the Centre, contributing only 10%.
- Other states received a 60:40 split, with the Centre contributing 60%.
- For special category states, 90% of Normal Central Assistance was in the form of grants and 10% as loans, while for other states, it was 30% grants and 70% loans.
- The Planning Commission ceased to exist, and the Finance Commission did away with the concept of special category status.
- However, the erstwhile special category states continue to receive 90:10 funding in centrally sponsored schemes.
Concerns and Alternative Proposals:
- The Central government fears that granting special category status to Andhra Pradesh and Bihar may trigger similar demands from other resource-stressed and backward states.
- Instead of special category status, the support for Andhra Pradesh and Bihar could be in the form of special packages, such as funds for building the capital city Amaravati in Andhra Pradesh or more Central projects.
- While there is no legal roadblock in reverting to the earlier system of special category status, the funds could be provided in the form of special packages, which would be a political decision.
Way Forward:
- States may be asked to place their requests for special category status to the 16th Finance Commission under Arvind Panagariya.
- The Finance Commission members are scheduled to begin their tour of states in late June to hold consultations with Chief Ministers and state officials.
- A special package for Andhra Pradesh is likely under the Andhra Pradesh Reorganisation Act for the construction of the capital city Amaravati, as funds were provided earlier but not fully disbursed due to the stoppage of construction.
- The CAG's September 2023 report highlighted incomplete infrastructure, questioned expenditure, and cited the land pooling mechanism as a significant financial burden.
