Special Category Status (SCS) Overview
Introduction and Purpose
Introduced by the Fifth Finance Commission in 1969.
Aimed at aiding states with historical economic or geographical disadvantages.
Criteria for SCS
Factors: difficult terrain, low population density, tribal population, strategic location, economic backwardness, non-viable state finances.
14th Finance Commission Changes
Recommended scrapping SCS as it is a burden.
Suggested increasing state tax devolution from 32% to 42%.
SCS was accorded to 11 states, including the entire Northeast, and the border hill states of Jammu and Kashmir, Himachal Pradesh, and Uttarakhand.
Andhra Pradesh’s Case for Special Category Status
Post-Bifurcation Financial Challenges
Bifurcation in 2014 led to loss of revenue and Hyderabad.
Financial distress emphasized by successive AP governments.
Revenue and Debt Disparities
Estimated revenue deficit: Rs 22,113 crore; actual: Rs 66,362 crore (2015-20).
Debt increased from Rs 97,000 crore to over Rs 3.5 lakh crore.
Economic Inequities
Disproportionate inheritance of population, debt, and liabilities.
Example: Hyderabad accounted for nearly all of the Rs 57,000 crore software exports.
Benefits of SCS for Andhra Pradesh
Financial and Industrial Incentives
Higher grants-in-aid from the Centre.
Industrial incentives: tax exemptions, custom duty waivers, reduced excise duty.
Funding Central Schemes
Centre funds central schemes up to 90% in SCS states vs. 70% in non-SCS states.
Economic Development
Vital for rapid industrialization.
Enhanced employment opportunities.
Encouragement of investments in various sectors.
Efforts to Secure SCS for Andhra Pradesh
Naidu’s Persistent Advocacy
Vocal and emotional appeal during 2014-19 tenure.
Resigned from NDA in 2018 due to Centre’s refusal to grant SCS.
Political Maneuvering
TDP’s anti-BJP, anti-Modi campaign in 2019.
Rival Jagan Mohan Reddy’s similar struggles after winning 2019 elections.
Strategic Positioning
Naidu now in a strong negotiating position with BJP lacking majority.
Challenges and Potential Compromises
Centre’s Limited Flexibility
BJP’s difficulty in acceding to SCS demands for AP alone.
14th Finance Commission’s view on SCS as a financial burden.
Possible Compromise Solutions
Temporary SCS grant for a specific period.
Increased Central projects in AP.
Halt to privatisation of Vizag steel plant.
Special Economic Zones with tax waivers.
Ministerial Portfolios
Potential for Naidu to secure favourable ministerial positions in the new Modi government.
Special Category Status for Andhra Pradesh
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