"No one can ignore Odisha's demand. It deserves special category status. It is a genuine right," said Odisha Chief Minister, Naveen Patnaik, earlier this month. The Odisha State assembly has passed a resolution requesting special category status and their demands follow Bihar's recent claim for special category status. The concept of a special category state was first introduced in 1969 when the 5th Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks. Initially three states Assam, Nagaland and Jammu & Kashmir were granted special status but since then eight more have been included (Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand). The rationale for special status is that certain states, because of inherent features, have a low resource base and cannot mobilize resources for development. Some of the features required for special status are: (i) hilly and difficult terrain; (ii) low population density or sizeable share of tribal population; (iii) strategic location along borders with neighbouring countries; (iv) economic and infrastructural backwardness; and (v) non-viable nature of state finances. [1. Lok Sabha unstarred question no. 667, 27 Feb, 2013, Ministry of Planning] The decision to grant special category status lies with the National Development Council, composed of the Prime Minster, Union Ministers, Chief Ministers and members of the Planning Commission, who guide and review the work of the Planning Commission. In India, resources can be transferred from the centre to states in many ways (see figure 1). The Finance Commission and the Planning Commission are the two institutions responsible for centre-state financial relations.
Figure 1: Centre-state transfers (Source: Finance Commission, Planning Commission, Budget documents, PRS)
Planning Commission and Special Category 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. For allocation among special category states, there are no explicit criteria for distribution and funds are allocated on the basis of the state's plan size and previous plan expenditures. Allocation between non special category states is determined by the Gadgil Mukherjee formula which gives weight to population (60%), per capita income (25%), fiscal performance (7.5%) and special problems (7.5%). However, as a proportion of total centre-state transfers NCA typically accounts for a relatively small portion (around 5% of total transfers in 2011-12). Special category states also receive specific assistance addressing features like hill areas, tribal sub-plans and border areas. Beyond additional plan resources, special category states can enjoy concessions in excise and customs duties, income tax rates and corporate tax rates as determined by the government. The Planning Commission also allocates funds for ACA (assistance for externally aided projects and other specific project) and funds for Centrally Sponsored Schemes (CSS). State-wise allocation of both ACA and CSS funds are prescribed by the centre. The Finance Commission Planning Commission allocations can be important for states, especially for the functioning of certain schemes, but the most significant centre-state transfer is the distribution of central tax revenues among states. The Finance Commission decides the actual distribution and the current Finance Commission have set aside 32.5% of central tax revenue for states. In 2011-12, this amounted to Rs 2.5 lakh crore (57% of total transfers), making it the largest transfer from the centre to states. In addition, the Finance Commission recommends the principles governing non-plan grants and loans to states. Examples of grants would include funds for disaster relief, maintenance of roads and other state-specific requests. Among states, the distribution of tax revenue and grants is determined through a formula accounting for population (25%), area (10%), fiscal capacity (47.5%) and fiscal discipline (17.5%). Unlike the Planning Commission, the Finance Commission does not distinguish between special and non special category states in its allocation.
The President issued the Criminal Law (Amendment) Ordinance on February 3, 2013. This ordinance amends the Indian Penal Code, Criminal Procedure Code and the Indian Evidence Act. Here we explain what an ordinance is, how it is made and with what frequency it is used. This article was first published on Rediff and can be accessed here. What is an ordinance and who makes it? Under the Constitution, the power to make laws rests with the legislature. However, in cases when Parliament is not in session, and ‘immediate action’ is needed, the President can issue an ordinance. An ordinance is a law, and could introduce legislative changes. The Supreme Court has clarified that the legislative power to issue ordinances is ‘in the nature of an emergency power’ given to the executive only ‘to meet an emergent situation’. An example of immediacy can be seen in the ordinance passed in 2011 to give IIIT - Kancheepuram the status of an institute of national importance so that students could be awarded their degrees on completion of their course. What will happen to the ordinance when Parliament meets for the Budget session? After the ordinance is notified it is to be laid before Parliament within 6 weeks of its first sitting. The first sitting of Parliament in the Budget session this year will be February 21, 2013. Parliament could either choose to pass the ordinance, disapprove it or it may lapse within the 6 week time frame. In addition, the President may chose to withdraw the ordinance. Once the ordinance is laid in Parliament, the government introduces a Bill addressing the same issue. This Bill is supposed to highlight the reasons that necessitated the issue of the Ordinance. Thereafter, the Bill follows the regular law making process. An amendment to Criminal Laws addressing similar issues is currently pending in Parliament. How will this play out vis-à-vis the ordinance? The ordinance gives effect to some of the provisions of the Criminal Laws (Amendment) Bill, 2012, with some modifications. In the upcoming Budget session the government may introduce a new Bill replacing both the Ordinance and the Amendment Bill currently pending in Parliament. The parliamentary Standing Committee is currently examining the Amendment Bill and is expected to submit its report by the end of March. How often does the President use this power to make ordinances? Data over the last 60 years indicates that 1993 saw the highest number of ordinances being passed, i.e. 34. In comparison, a fewer number of ordinances are now being issued. For example, in the last 10 years the average number of ordinances issued per year is 6.
