Telangana fallout: States renew calls for special status

Feb 22 2014, 00:08 IST
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SummaryThe proposed addition of Seemandhra — the residual region of Andhra Pradesh after...

The proposed addition of Seemandhra — the residual region of Andhra Pradesh after the creation of the new state of Telangana — into the already 11-strong list of special category states has, as expected, resulted in a crescendo of demands for such privilege from a host of other states.

The Lok Sabha on Friday witnessed friends-turned-foes BJP and Janata Dal (United) jointly articulating the urgency of giving Bihar the special status. Bihar’s demand grew in intensity amid indications that Seemandhra, which perceives itself to be the loser in the splitting of India’s fourth-largest state, could also get a wholesome financial package besides a five-year special-category tag. Such packages (formalised as special Plan assistance or special central aid) are what would help states like Bihar more than the special category tag, analysts feel.

Coaxed by UPA chairperson Sonia Gandhi, Prime Minister Manmohan Singh is expected to announce the package for Seemandhra soon. Besides Bihar, at least five other states (Chhattisgarh, Jharkhand, Odisha, Rajasthan and Uttar Pradesh) have in the past clamoured for special-category status and are now likely to reassert themselves, causing a headache for policymakers and planners at the Centre.

Pertinently, unlike the 11 special category states — eight northeastern states plus J&K, Himachal Pradesh and Uttarakhand — the ones that now want the tag are much bigger, economically. Even now, the Finance Commission’s criteria for the tax revenue devolution to a state that is indexed, inter alia, to population, land area and backwardness are hugely beneficial to states like Bihar. And these benefits, at least in absolute terms, are much bigger than the special category tag itself would bring — certainly so if the excise duty waiver for industries in the special category states is excluded.

The imbroglio that would result from a random raising of the pitch by Bihar and other “backward states” is a potential threat to the equity of India’s fiscal federalism. It could make things difficult for the Centre, which is “actively considering” a rejig of the present norms for resource allocation to states using the multidimensional index to identify backwardness proposed by the Raghuram Rajan committee. Experts believe that employing the Rajan index would be much more beneficial to all the six states demanding special-category tag that the tag itself.

The Rajan committee, as finance minister P Chidambaram said in Parliament on Thursday, was mandated to identify states that are far below the national average in terms

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