Special category states v/s Special Assistance (Non-plan grants) to States?

1.       Whether "Special category states" have a constitutional/statutory backing; furthermore is there any difference b/w financial assistance to "Special category states" v/s Special Assistance (Non-plan grants) to States?

"Special status" and "Special category status" - for states are two different things.

Special status is guaranteed by the Constitution of India through an Act passed by the two-third majority in both houses of the Parliament, as in the case of Jammu and Kashmir, whereas Special Category Status is granted by the National Development Council, an administrative body of the government. While Special Status empowers legislative and political rights, Special Category Status deals only with economic, administrative and financial aspects.

The NDC bestows Special Category Status based on certain parameters such as low resource base, hilly and difficult terrain, low population density or sizeable share of tribal population and strategic (hostile) location.

2.       Is the Assistance based specifically to grants or other benefits like, quota in economic allocation etc.?

The Planning Commission allocates funds to states through central assistance for state plans. Central assistance can be broadly split into three components: Normal Central Assistance (NCA), Additional Central Assistance (ACA) and Special Central Assistance. NCA, the main assistance for state plans, is split to favour special category states: the 11 states get 30% of the total assistance while the other states share the remaining 70%. The nature of the assistance also varies for special category states; NCA is split into 90% grants and 10% loans for special category states, while the ratio between grants and loans is 30:70 for other states.

Finance Commission recommends the principles governing non-plan grants and loans to states. Examples of such grants would include funds for disaster relief, maintenance of roads and other state-specific requests.

3.       We see some states demanding special status. Coastal Andhra is best example however as per the HDI Orissa require more grants. In this situation how will the finance Commission will its allocation?

Apart from that Special-category states get significant excise duty concessions that attract industries to relocate/locate manufacturing units within their territory. This has been a sore point with neighbouring general-category states.

In the case of coastal Andhra - creation of new capital was one of the reason for such demand. So states do ask for genuine reasons!!!