Special Category Status or special package?

Andhra Pradesh has been demanding Special Category Status (SCS) for quite some time; the demand has now reached a peak. Will AP manage to get it? Economically, the tag of SCS no longer means a bonanza of special funds to any State from the Centre 47 years after it was introduced, this SCS has ceased to be anything special.

After the 14th Finance Commission Recommendations, from 2015-16 onwards the Centre virtually did away with economic privileges attached with SCS, since the share of States in Central taxes was raised from 32 per cent to 42 percent. But, the Centre can now take a political decision by bestowing this privilege on AP and still find enough reasons to deny the State the economic benefits that supposedly go with it.

At this juncture, the AP government must know that the State needs more funds instead of SCS. Because the State lost Rs 70,000 crore in revenue with the loss of Hyderabad to Telangana; as a result, it is having to build a new capital Amaravati with huge costs. The AP demand is largely supported by the fact that the largesse that SCSs received last year was indeed significant.

In 2014-15, for instance, the Centre’s Plan Budget, accounting for a quarter of all the Centre’s budgetary resources, was spent following way: 59 per cent of the Plan Budget went as Central Assistance to State Plans; 41 per cent went to schemes of Central departments; Out of the 59 per cent Central Assistance to State Plans, 44 per cent was transferred to States for Centrally Sponsored Schemes and 15 per cent as Block Grants to States; and Block Grants had several sub-categories that included Normal Central Assistance, Special Central Assistance and Special Plan Assistance.

In 2014-15, the SCS States received 56.25 per cent of all the Normal Central Assistance, 90 per cent of it as grant and 10 per cent as loan. In contrast, the general category States got the remaining 43.75 per cent, but only 30 per cent as grant. Moreover, the SCS States got the Special Plan Assistance (90 per cent of a project’s cost as grant), Special Central Assistance untied to any projects (100 per cent as grant) and a 90 per cent grant in the Centrally Sponsored Schemes.

However, this changed with the 2015-16 budget, with States receiving higher share of 42 per cent central taxes, the Centre ignored the benefits that are associated with SCS and also slashed the outlay of Centrally Sponsored Schemes. Besides this, the Centre has rejected Bihar demand for SCS, though some States including Bihar are complaining that despite higher share in central taxes, they are getting less funds from the Centre than before. The Centre is of the view that consideration of SCS to any new State will result in demands from other States and dilute the benefits further.

It may be recalled that the Tamil Nadu government has shot off a letter to the Centre, cautioning against conceding the demand of AP, and it requested the Centre must ensure a “level-playing field” for States. Any special concession to AP will raise the demand from other States like Odisha, Jharkhand and Rajasthan which have been demanding the ‘special’ tag and are are sure to cry foul.

On its part, the AP government must demand, instead of “Special Status” that doesn’t ensure funds, a special package that does. It must pressure the Centre to develop the State in terms of infrastructure, as per the AP Reorganisation Act along with demand that the Centre shell out more cash by way of more Centrally Sponsored Schemes in Andhra Pradesh. However, Union Finance Minister assured that the government is committed to keeping all its promises and fulfill all its responsibilities as far as handholding AP is concerned. Now, it is the time for AP to make use of it.

By Gudipati Rajendera Kumar