Special Status Demand for Bihar and Andhra Pradesh: What it is and Why it Remains Key for NDA Allies in Modi 3.0

Prime Minister Narendra Modi has already taken the oath of office for the third consecutive term, and we already know who's who in the new cabinet. Although the BJP didn't quite reach the majority mark on its own this time around, they got a big boost from their allies in the NDA alliance.

Chandrababu Naidu's Telugu Desam Party clinched 16 seats in Andhra Pradesh while Nitish Kumar's Janata Dal (United) secured 12 seats. Both parties are set to play a key role in the new government's policy framework.

However, the coalition form often has its own plays. Both Andhra Pradesh and Bihar have demanded the 'Special Category Status’ (SCS) and have been quite persistent on the same. Yet some crisscrossed lines make the 'Special Category Status' rule quite blurry, here is all you need to know about what is SCS and why both states are demanding the same.

What is 'Special Category Status?'

Special Category Status (SCS) is often granted to states that are economically and geographically disadvantaged and need a boost to their development. Even though it's not directly mentioned in the Constitution, there's a provision for it. Back in 1969, Jammu and Kashmir was the first state to be granted a SCS, under the recommendations of the Fifth Finance Commission.

Which states have the 'Special Category Status?'

After J&K received the special status, multiple other states followed a similar trail. A total of 11 states, namely Assam, Nagaland, Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand, and Telangana, have been granted the special category status.

However, later the 14th Finance Commission removed the 'special category status' for most states, except for those in the Northeast and three hill states. Instead, it proposed to bridge the resource gap in these states by increasing tax devolution to 42 per cent.

Why Bihar and Andhra Pradesh are asking for SCS?

The special category status comes with its own benefits and financial perks. If a state is granted the 'Special Category Status,' the Central government covers 90 per cent of the expenses for centrally-sponsored schemes, leaving the state to chip in just 10 per cent. Usually, other states have to manage with a 60:40 funding split, where 60 per cent comes from the Central government.

On top of that, Special Category states receive tax and duty exemptions, including customs, income tax, and corporate tax. They are also allocated a 30 per cent share of the Centre’s Gross Budget.

Is this the first time Bihar and Andhra Pradesh are demanding the same?

No, in fact, TDP's Chandrababu Naidu has been demanding for Special Category Status since the separation of Andhra Pradesh and Telangana.

Initially, the UPA government showed willingness to support this demand. However, with the NDA government coming into power in the same year, the momentum for granting SCS to the state waned, especially as the Planning Commission dissolved, making way for NITI Aayog.

It was stated that Andhra Pradesh didn't meet the criteria for SCS. For instance, it wasn't located in a geographically disadvantaged area like hilly states.

Instead of SCS, the Centre offered Andhra Pradesh a special package (SP), which included various benefits such as bringing the Polavaram irrigation project under the national project category with full funding from the Union Government. The state also received tax concessions and was given special assistance of Rs 10,461 crore.

In Bihar's case, Nitish Kumar has remained steadfast in his demand for the same. Just like last week, while addressing an NDA alliance meeting, he explicitly stated, "All the pending works of Bihar will be done..."

Meanwhile, on June 11, Kumar has already passed a proposal to grant 'special category status' to Bihar.

Back in 2020, PM Modi had launched nearly 30 infrastructure projects in five phases. Quite a few of these projects were actually part of Bihar's special package.

There were ten major projects in this package, worth Rs 21,000 crore. Even before that, back in 2015, the NDA had made similar announcements and introduced a financial package worth Rs 1.25 lakh crore for Bihar.

While the decision to grant Special Category Status to Bihar and Andhra still hangs in the air, it will be interesting to watch out how coalition plays out in policy frameworks within Modi 3.0's cabinet.