Explained | What is Special Category Status accorded to states?

In what seems to be politically significant, Union Finance Minister Nirmala Sitharaman on Friday made it clear that there is no proposal to accord Special Category Status to Odisha as demanded by the ruling Biju Janata Dal (BJD).

Odisha has been demanding Special Category Status for several years now. Andhra Pradesh and Bihar governments have also echoed the demand for this status.

Here we simplify what it means and what benefits it brings to the states.

So, what is the Special Category Status?

The special category status was introduced in 1969 on the recommendations of the Fifth Finance Commission to benefit certain backward states having hilly terrains, strategic international borders, and economic and infrastructural backwardness.

To be able to get the status, states have to fulfill the following requirements:

- They need to have hilly and difficult terrain
- They need to have low population density and /or a sizeable share of the tribal population
- They must be in a strategic location along borders with neighbouring countries
- They must be economically and infrastructurally backward
- They must have non-viable nature of state finances

Which states have the Special Category Status?

Currently, eleven states have the Special Category Status in the country including Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana. These states have been accorded the status as they share borders with other countries. Odisha lacks that requirement.

Telangana, the newest state of India, is accorded the status as it was carved out of another state - Andhra Pradesh, which hit the state's finances.

What benefits do states with SCS enjoy?

Under this status, the government pays 90 per cent of the funds in schemes that the Centre sponsors. Regular states get 60 per cent to 75 per cent of the fund from the Centre under the same schemes and they have to manage the rest. In case of unspent money, the states with SCS have the provision to carry it forward.

These states also enjoy a significant concession on excise, customs duties, income tax, and corporate tax.

Why is Odisha demanding Special Category Status?

Chief Minister Naveen Patnaik has been demanding the Special Category Status citing instances of being the most vulnerable state to natural calamities like cyclones.

The state government also cited that since Odisha’s population comprises above 22 per cent of people belonging to tribals and has a vast backward area, it required special attention.