‘SCS to AP, Bihar shouldn’t be a political move’

The criteria for SCS are primarily for hilly terrain with low population density and development of vulnerable border areas, which don’t apply to AP and Bihar - Ashima Goyal, MPC Member, RBI

New Delhi: The issue of granting special category status (SCS) to Bihar and Andhra Pradesh should be decided on non-political considerations by a constitutional body, RBI’s Monetary Policy Committee (MPC) member Ashima Goyal said on Monday. Goyal further said the 14th Finance Commission has already ruled on special category status States.

Andhra Pradesh has been demanding special category status after its bifurcation in 2014 on the grounds of revenue loss as Hyderabad became the capital of Telangana. Bihar has also been seeking the special status since 2005 when Nitish Kumar was sworn in as its Chief Minister. The State also suffered revenue loss after the mineral-rich Jharkhand was carved out of it in 2000. “The criteria for SCS are primarily for hilly terrain with low population density and development of vulnerable border areas, which do not apply to the two states,” Goyal told.

For special category status states, the Centre meets 90 per cent of the funds required in a centrally sponsored scheme against 60 per cent in the case of normal category states. The remaining funds are provided by the State government.

“Moreover, the 14th Finance Commission had ruled that no more SCS states should be created. The issue is best decided on non-political considerations by a constitutional body,” the eminent economist said. The 14th Finance Commission raised the share of states in taxes collected by the Centre to 42 per cent from 32 per cent but abolished special category states.

The special status category was introduced in 1969 on the recommendation of the Fifth Finance Commission to benefit certain backward states with hilly terrains, strategic international borders, and economic and infrastructural backwardness. With support from N Chandrababu Naidu’s TDP and Nitish Kumar’s JD (U), which won 16 and 12 seats in Andhra Pradesh and Bihar, respectively, and other alliance partners, the NDA has crossed the halfway mark to form the government at the Centre.

Responding to the debate on economically and socially better-off southern and western states ‘subsidising’ the northern and eastern states, Goyal said net resource flows are part of what has kept the country together.

“Directions of flows have differed in the past and will change again in the future,” she said, adding that states gain much more than just resources participating in a vibrant growing common market. Moreover, she asserted that facts do not support the divisive agenda.

According to her, data from four populous northern states -- Bihar, Madhya Pradesh, Rajasthan, and Uttar Pradesh and four southern states, Andhra Pradesh, Karnataka, Kerala, and Tamil Nadu, shows since 2000, the formula-based share of taxes fell for southern states, while the share of discretionary grants from the Centre rose for them and fell for the northern states.