Bihar’s Call for Special Category Status (SCS)

November 28, 2023

On November 22, the Chief Minister Nitish Kumar-led Cabinet took a significant step by passing a resolution urging the Centre to grant special category status (SCS) to Bihar. This demand is grounded in the findings of the “Bihar Caste-based Survey, 2022,” revealing that almost one-third of Bihar’s population continues to grapple with poverty.

Understanding Special Category Status

Special Category Status (SCS) is a classification bestowed by the Centre to aid the development of states facing geographical or socio-economic disadvantages. Introduced in 1969 on the recommendation of the fifth Finance Commission, SCS considers factors such as hilly terrain, low population density, strategic location along international borders, economic and infrastructural backwardness, and non-viable state finances before its grant.

Benefits Tied to Special Category Status

Historically, SCS states received grants under the Gadgil-Mukherjee formula, allocating nearly 30% of total central assistance to them. However, changes post the abolition of the Planning Commission and recommendations of the 14th and 15th Finance Commissions altered this landscape. Despite this, SCS states continue to enjoy a more favorable Centre-State funding ratio for centrally sponsored schemes and other incentives like concessions in customs and excise duties.

Why Bihar is Pushing for Special Category Status

Bihar’s plea for SCS stems from its prolonged struggle with poverty and backwardness, attributed to factors like a scarcity of natural resources, water supply challenges, frequent floods, and severe droughts. The state’s division resulted in the migration of industries to Jharkhand, exacerbating unemployment and limiting investment opportunities. With a per-capita GDP of approximately ₹54,000, Bihar remains among the most economically challenged states. Chief Minister Nitish Kumar emphasizes that the grant of SCS could provide around ₹2.5 lakh crore for various welfare measures over the next five years.

Similar Demands Across the Nation

Bihar is not alone in seeking SCS. Since its bifurcation in 2014, Andhra Pradesh has sought SCS, citing revenue loss due to Hyderabad going to Telangana. Odisha, vulnerable to natural calamities and with a substantial tribal population, has also pressed for SCS. However, these requests have been consistently denied by the Central government, referencing the recommendations of the 14th Finance Commission.

Justifying Bihar’s Demand

While Bihar largely meets the criteria for SCS, it falls short in terms of hilly terrain and geographically difficult areas, seen as crucial for infrastructural development. The Raghuram Rajan Committee in 2013 labeled Bihar as “least developed” and proposed a new methodology based on a ‘multi-dimensional index’ for fund allocation, indicating an alternative approach to address the state’s socio-economic backwardness. This suggests a nuanced evaluation beyond the conventional SCS framework.

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