Making Seemandhra special

Mar 12 2014, 04:05 IST
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SummaryThe Centre’s decision to accord a five-year ‘special category’ status to the new state of Seemandhra after the creation of Telangana will intensify similar demands from Bihar and Odisha

What all benefits special category states receive?

Along with the Finance Commission-mandated devolution formula that currently stipulates transfer of 32% of the Centre’s gross tax revenue to states, the special category states—there are 11 such states right now of India’s total 28—are entitled to get 30% of the Centre’s Plan assistance. That apart, special category states get 90% of the total central assistance to state Plans as grants and the rest 10% as loans (the ratio for other states is 30% grants and 70% loans).

The Centre gives full exemption from excise duties to companies setting up industrial units in special category states for the first 10 years of production besides income tax exemption of 100% for the first five years and 30% for the next five. Companies also get capital investment subsidy at the rate of 15% of their investment in plant and machinery.

Which states enjoy the special category status?

Eight north-eastern states, Jammu & Kashmir, Himachal Pradesh and Uttarakhand enjoy the special category status. This is based on criteria of their being hilly, sharing international borders, having relatively low per capita income and a low industrial base that restricts them from scaling up revenues and meeting their expenditures.

Initially, three states—J&K, Assam and Nagaland—qualified as per a formula framed by former Planning Commission deputy chairman DR Gadgil in 1969. After subsequent revisions in the Gadgil formula, the list of special category states expanded to include 11 states. Seemandhra would be 12th state to be included in the list.

Which states are demanding special status?

Apart from Seemandhra, Bihar has been the most vocal among the states demanding special treatment. Chhattisgarh, Jharkhand and Odisha have also been demanding the special category status for a decade now, citing economic backwardness.

Why has Seemandhra been accorded special status?

According to the BN Srikrishna committee, the Seemandhra region is economically weaker than Telangana—the per capita income calculated in terms of district domestic product (DDP) of the Telangana region including Hyderabad was R27,006 per annum in FY08 while it was R23,860 for Rayalaseema and R26,655 for Coastal Andhra. The IT boom and faster industrial development pushed up Hyderabad’s per capita income by more than three times to R39,145 in FY08 from R12,745 in FY94, which has, in turn, aided relatively faster growth in the Telangana region as compared with the other two regions.

In terms of sales tax collections, Telangana accounted for 82.8% of the overall undivided state’s receipts with Hyderabad alone

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