What Nitish Kumar, Chandrababu Naidu Want In Return For Supporting BJP? Is Special Category Status On Table?

The fractured mandate in the Lok Sabha election has put spotlight on the role of Telugu Desam Party (TDP) chief Chandrababu Naidu and Janata Dal (United)’s Nitish Kumar in government formation at the Centre. In return, the leaders are likely to revive their past demands for special status for Andhra Pradesh and Bihar.

Naidu’s TDP, which is in alliance with the Jana Sena Party and BJP, won 16 seats in the Lok Sabha election, while the JD(U), which is in coalition with the BJP and Lok Janshakti Party (LJP) secured 12 seats. Their support is even more critical to the BJP, which has only 240 seats in Lok Sabha.

Meanwhile, Congress General Secretary Jairam Ramesh had said the Congress would guarantee special status to Andhra Pradesh, as was promised by former Prime Minister Manmohan Singh, if it came to power.

What is Special Category Status?

The Fifth Finance Commission of India introduced the special category for states in 1969 for the development and fast-tracking growth of states if they face historical economic or geographical disadvantages. The status could be granted under factors such as difficult and hilly terrain, low population density or sizeable tribal population, strategic location along borders, economic and infrastructural backwardness and poor state finances.

The 14th Finance Commission had scrapped the concept of special category after it was suggested that the resource gap of the states should be filled by increasing the devolution of tax to 42% from 32%.

Which States Have the Special Category Status?

When the issue first came up in 1969 when the Gadgil formula of fund allocation was cleared by the National Development Council, the special category status was provided to Assam, Jammu and Kashmir and Nagaland, which were provided Central Assistance in the form of 90% grant and 10% loan. Later, more states were given the special category status when they attained statehood. These include Himachal Pradesh in 1970-71, Manipur, Meghalaya and Tripura in 1971-72; Sikkim in 1975-76 and Arunachal Pradesh and Mizoram in 1986-87 and Uttarakhand in 2001-02.

At present, 11 states have the Special Category Status in the country, including Telangana. Telangana was accorded the status as it was carved out of another state – Andhra Pradesh, which hit the state’s finances.

What Benefits Do States Get?

Under this status, the government pays 90% of the funds in schemes that the Centre sponsors. For non-special category status states, the central assistance was calculated at 30% grant and 70% loan.

Special Category States were also provided Special Plan Assistance for projects of special importance to the state. Further, unspent funds do not lapse at the end of the financial year.

Why Bihar and Andhra Pradesh are Demanding Special Status?

Nitish Kumar had been demanding the special status for Bihar after the mineral-rich Jharkhand was carved out of it back in 2000.

With a per-capita GDP of around Rs 54,000, Bihar has consistently been one of the poorest states. CM Nitish Kumar said the state is home to 94 lakh poor families and the granting of SCS will help the government get about Rs 2.5 lakh crore required to fund welfare measures over the next five years.

Bihar has been ranked as the poorest state in India, according to the Centre’s ‘Multi-dimensional Poverty Index’ (MPI) report. It is estimated to have nearly 52% of its population, without having proper access to requisite health, education and living standards.

While the state meets most of the criteria for the Special Category Status, it does not fulfil the criteria of hilly terrain and geographically difficult areas.

Andhra Pradesh has also been seeking the special category status after its bifurcation in 2014 on the grounds of revenue loss due to Hyderabad, where much of the development was concentrated, becoming part of Telangana.

After Narendra Modi became the Prime Minister, Naidu, who was the CM from 2014-2019, and Jagan Mohan Reddy, who held the post in 2019-2024, repeatedly demanded the special category status so that the state’s financial distress can be addressed.

According to the presentations made by the Andhra Pradesh government to NITI Aayog, the body that succeeded the Planning Commission, the 14th Finance Commission estimated that the post-devolution revenue deficit for AP for the five-year period 2015-20 would be Rs 22,113 crore, but in reality, this figure stood at Rs 66,362 crore. The debt of the residuary state, which was Rs 97,000 crore at the time of bifurcation, reached Rs 2,58,928 crore by 2018-19, and is more than Rs 3.5 lakh crore now.

The government argues that the state was divided in an unfair manner in which it inherited nearly 59% of the population, debt, and liabilities and only 47% of its revenues.

Today, Andhra Pradesh is essentially an agrarian state. The per capita revenue of Telangana for 2015-16 was Rs 14,411, while it was only Rs 8,397 for Andhra Pradesh.

How Naidu, Nitish Have Pressed for their Demand in the Past

Naidu had been demanding the special category status since the Modi government came to power in 2014. In March 2018, Naidu asked his two ministers at the Centre — P Ashok Gajapati Raju (Civil Aviation) and Y Satyanarayana Chowdary (MoS, Science and Technology and Earth Sciences) — to resign after the Centre refused to listen to his pleas. He then quit the NDA and launched an anti-BJP, anti-Modi campaign for the Assembly election of May 2019.

During the last Assembly session in February, Jagan Mohan Reddy expressed frustration over the special category status issue, and said he wished that no party gets an absolute majority in Lok Sabha, so that the state can bargain for the status.

For Bihar’s special category status, Nitish Kumar had raised the issue first in 2006 but successive central governments turned deaf ear.

He accepted Niti Aayog’s assessment of Bihar, but offered his own reasons for the state’s backwardness — the disproportionately high population.

How Andhra Pradesh and Bihar will Benefit from the Status?

The Special Category Status would mean more central funds to Andhra Pradesh and Bihar. For example, per capita grants to Special Category States is Rs 5,573 crore per year, whereas Andhra Pradesh receives only Rs 3,428 crore.

The Andhra Pradesh governments believe that special incentives are vital for the rapid industrialisation of the agrarian state, and would bring more employment opportunities for the youth.

The status would also encourage investments in specialty hospitals, five-star hotels, manufacturing industries, high-value service industries such as IT, and premier institutions of higher education and research.