SCS is a classification provided by the Central Government to aid development within states that struggle with geographical and socio-economic challenges. This classification was recommended by the 5th Finance Commission in 1969, although it is not provisioned for in the Constitution. Originally, this status was granted to Jammu and Kashmir, Assam, and Nagaland in 1969. At present, eleven states, including Telangana, the newest addition to India, have been granted SCS. While special status pertains to enhanced legislative and political rights, SCS focuses solely on economic and financial issues.
Parameters for SCS and Its Benefits
The parameters for SCS are based on the Gadgil Formula and include aspects like hilly terrain, low population density, strategic location along borders, economic and infrastructure backwardness, and nonviability of state finances. Previously, states with SCS received around 30% of central assistance. Although this has changed following recommendations from the 14th and 15th Finance Commissions (FC), these states continue to receive significant financial support. They receive 90% of required funds under a Centrally-Sponsored Scheme, and any unspent money carries forward into the next financial year. Additionally, they also get concessions in excise and customs duties, income tax, and corporate tax.
The Case for Bihar’s Demand for SCS
Bihar’s demand for SCS stems from various factors including significant economic disparities, natural calamities, lack of infrastructure, high poverty rates, and minimal social development. Given that many industries moved to Jharkhand after the bifurcation of Bihar, the state has been seeking SCS as a means to secure substantial financial assistance for development projects. With about 94 lakh poor families residing in Bihar, the grant of SCS could provide a significant boost to the government’s efforts to fund welfare measures.
Does Bihar Meet the Criteria for SCS?
While Bihar meets most SCS criteria, it fails to fulfill the requirement of having hilly terrain and geographically difficult areas. In 2013, the Raghuram Rajan Committee categorized Bihar as “least developed” and suggested using a ‘multi-dimensional index’ for devolving funds instead of granting SCS. This could address the socio-economic backwardness in the state.
SCS Demands from Other States
Since 2014, Andhra Pradesh and Odisha have also sought the SCS on grounds of revenue loss and vulnerability to natural calamities, respectively. However, the Central Government has consistently denied these demands, citing the 14th FC report that recommended against granting SCS status to any state.
Concerns Regarding the Granting of SCS
Allocating additional financial resources to states with SCS can strain the central government’s resources, potentially leading to dissatisfaction among non-SCS states. Additionally, states with SCS often become heavily reliant on central assistance, which might discourage independent economic growth strategies. Implementation challenges such as administrative inefficiencies, corruption, or poor planning might also arise, making it challenging to utilize the allocated funds effectively.
The Way Ahead
A revision and refinement of the criteria for granting SCS are necessary for ensuring fairness and transparency. States should be encouraged to create comprehensive development plans that focus on sustainable growth, job creation, infrastructure development, and human capital enhancement. Policy implementation should aim to reduce states’ dependency on central assistance and promote self-sufficiency and economic diversification.