Bihar State PCS

• 23 Jul 2024

Bihar's 'Special Category' Status Denied

Why in News?

Recently, The Centre rejected the request for ‘special category’ status for Bihar during the all-party meeting.

Key Points

• No new states are being awarded ‘special category’ status at present, as the Indian Constitution does not accommodate such classification.
  • Bihar is requesting both special state status and a distinct financial package. The call for special status for Bihar has persisted since the state was split into Bihar and Jharkhand.
• The Gadgil formula:
  • The issue of special category status was first discussed in a National Development Council (NDC) meeting in 1969. During this session, the DR Gadgil Committee proposed a formula for distributing central assistance to state plans in India. 
    • Prior to this, there was no specific formula for fund allocation, and grants were allocated based on individual schemes. 
  • The Gadgil Formula, which received NDC approval, prioritized the needs of special category states like Assam, Jammu & Kashmir, and Nagaland in the allocation of Central assistance.
  • In 1969, the 5th Finance Commission acknowledged the historical challenges faced by certain regions and introduced the special category status. 
    • This designation granted specific disadvantaged states special benefits, including central assistance and tax relief. 
    • The National Development Council then allocated Central Plan Assistance to these states based on this status.
  • Until the financial year 2014-2015, the 11 states with special category status enjoyed various benefits and incentives.
    • However, with the dissolution of the Planning Commission and the establishment of the NITI Aayog in 2015, the recommendations of the 14th Finance Commission resulted in the cessation of grants based on the Gadgil Formula. 
    • Consequently, the share of the divisible pool allocated to all states was increased from 32% to 42%.