Special category status used to be granted to some regions that have historically been at a disadvantage, as compared to the rest of the country. National Development Council (NDC) chooses states for special category benefits based on various factors such as hilly and difficult terrain, economic and infrastructure backwardness and non-viability of the state’s finances.
Jammu & Kashmir was the first states to get special category status. 10 more states joined this league including Uttarakhand.
States with special category status enjoy numerous benefits such as special central assistance grants, assistance for externally aided projects being given as 90% grants, excise duty concessions and other tax breaks. Furthermore, the state shares in centrally sponsored schemes at lower price as compared to other general category states.
Andhra Pradesh bifurcated in 2014, and sought special category status on the grounds that it was at a disadvantage, especially because of the loss of capital Hyderabad to Telangana. Manmohan Singh, then-prime minister, has told that special category status would be extended to Andhra Pradesh for five years but the 14th Finance Commission changed this.
Now, the category status is restricted to three hill states and states in the Northeast. It was also decided that a revenue deficit grant would be provided for certain states for which devolution alone would be insufficient. Andhra Pradesh was given a revenue deficit grant.
Earlier in the week, Andhra CM Chandrababu Naidu threatened that it would walk out of the BJP-led National Democratic Alliance. Naidu asked MPs from his Telugu Desam Party to continue protesting in Parliament till the demand was met.
However, Jaitley , Finance Minister said that Centre would honor the commitments made to Andhra in 2014 but the granting of special category status itself was restricted by the 14th Finance Commission. Now as, Telugu Desam Party has only 16 members in Lok Sabha and 6 in Rajya Sabha, there is not question of any threat to the BJP government. Nor is the stability of the Andhra Government at stake.
This move seems more like political posturing by Naidu with the 2019 elections in mind, when he can hold the BJP accountable for not granting the state special category status. Things might get intensified as election would come closer.