Why in news:

• Recently, Rajasthan government has once again raised the demand for giving special state status to the state.
• In this regard, the Rajasthan government has conveyed to the central government that the state is facing a complex financial situation due to the adverse conditions of coronavirus and declining revenue income.

Key Points

• Other reasons cited by the state government for giving special category status to the state are state`s increasing share in centrally sponsored schemes, non-payment of GST compensation by the Center and transfer of an amount less than the estimate of the 15th Finance Commission.
• These have been cited as the major reasons for this decrease in state’s revenue.
• The solution to this, as per the state government lies in giving special state status to Rajasthan
• According to the state government’s recent request, the geographical conditions of Rajasthan are quite complex and the cost of service delivery here is much higher than in other states.
• In these circumstances, Rajasthan should get special status, but the central government has not yet taken any positive step in this direction.
• This demand was reiterated by the Rajasthan chief minister in the second meeting of the Chief Minister`s Economic Reforms Advisory Council.
• Addressing the second meeting of the Chief Minister`s Economic Reforms Council through video conferencing, Gehlot said that Rajasthan is one of the few states in the country which has increased its expenditure to give a boost to the economy despite a sharp fall in revenue.
• However, despite the challenging situation, the state government has been accelerating projects in education, health, infrastructure, power and other sectors with economic reforms and efficient management of resources.
• All these welfare oriented projects and activities require funds and the state has been finding it hard to garner the requisite funds due to current situation.
• Thereby, it becomes necessary for the central government to enter the  scene and assist the struggling state by granting is Special Category Status, the state government opines.
  
  
   

Special Category Status (SCS):

• Special category status is a classification given by the Centre to assist development of states that face geographical and socio-economic disadvantages.
• It was based on the Gadgil formula.
• This classification was done on the recommendations of the Fifth Finance Commission in 1969.

The parameters for provision of Special Category Status were:

• Hilly Terrain
• Low Population Density And/Or Sizeable Share of Tribal Population
• Strategic Location along Borders With Neighbouring Countries
• Economic and Infrastructure Backwardness
• Nonviable Nature of State finances.

• Special category status was first accorded in 1969 to Jammu and Kashmir, Assam and Nagaland.
•  Since then eight more states have been included (Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand).
• There is no provision of Special category status in the Constitution.
• Special Category Status for plan assistance was granted in the past by the National Development Council to the States that are characterized by a number of features necessitating special consideration.
• Currently, it is done by the central government.
• The 14th Finance Commission has done away with the 'special category status' for states, except for the Northeastern and three hill states.
• Instead, it suggested that the resource gap of each state be filled through ‘tax devolution’, urging the Centre to increase the states' share of tax revenues from 32% to 42%, which has been implemented since 2015.
  
  
   

Benefits to States with SCS:

• The Centre pays 90% of the funds required in a centrally-sponsored scheme to special category status states as against 60% or 75% in case of other states, while the remaining funds are provided by the state governments.
• Unspent money does not lapse and is carried forward.
• Significant concessions are provided to these states in excise and customs duties, income tax and corporate tax.