"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.
In recent news reports there have been deliberations on whether there is a possibility of appealing a central government decision on forest clearances. In this context, the National Green Tribunal (NGT) has directed states to comply with the statutory requirement of passing an order notifying diversion of forest land for non-forest purposes. It has also held that it can hear appeals from the orders of state governments and other authorities on forest clearances. The NGT was established in 2010 to deal with cases relating to environmental protection, and conservation of forests and other natural resources. The need was felt to have a mechanism to hear appeals filed by aggrieved citizens against government orders on forest clearances. For instance, the NGT can hear appeals against an order of the appellate authority, state government or pollution control board under the Water (Prevention and Control of Pollution) Act, 1974. How is a forest clearance obtained? Obtaining a forest clearance is a key step in the process of setting up a project. Recently the Chhatrasal coal mine allotted to Reliance Power's 4,000 MW Sasan thermal power project in Madhya Pradesh has received forest clearance. The Ministry of Environment and Forests (MoEF) first gives ‘in-principle’ approval to divert forest land for non-forest purposes based on the recommendations of the Forest Advisory Committee. This approval is subject to the project developer complying with certain conditions. Once these conditions are complied with, the central government issues the final clearance. It is only after this clearance that the state government passes an order notifying the diversion of forest land. The NGT’s decision deals with this point in the process during which an appeal can be filed against the order of forest clearance. For the flowchart put out by the MoEF on the procedure for obtaining a forest clearance, see here. What was the NGT’s ruling on forest clearances? The NGT was hearing an appeal against a forest clearance given by the MoEF to divert 61 hectares of forest land for a hydroelectric project by GMR in Uttarakhand. The NGT has ruled that it does not have the jurisdiction to hear appeals against forest clearances given to projects by the MoEF. However, the NGT has the power to hear appeals on an order or decision made by a state government or other authorities under the Forest (Conservation) Act, 1980. The judgment observed that though Section 2 of the Forest (Conservation) Act, 1980 requires that state governments pass separate orders notifying the diversion of land, this requirement is not being followed. The NGT has directed that state governments pass a reasoned order notifying the diversion of the forest land for non-forest purposes, immediately after the central government has given its clearance. This will allow aggrieved citizens to challenge the forest clearance of a project after the state government has passed an order. Additionally, the NGT has also directed the MoEF to issue a notification streamlining the procedure to be adopted by state governments and other authorities for passing orders granting forest clearance under section 2 of the Forest (Conservation) Act, 1980. There are some concerns that an appeal to the NGT can only be made after the state government has passed an order notifying the diversion of forest land and significant resources have been invested in the project. What is the status of applications for forest clearances made to the MoEF? The MoEF has given approval to 1126 proposals that involve the diversion of 15,639 hectares of forest land from July 13, 2011 to July 12, 2012. The category of projects accorded the most number of approvals was road projects (308) followed by transmission lines (137). Some of the other categories of projects that received clearance for a significant number of projects were mining, hydel and irrigation projects. However, most land was diverted for mining related projects i.e., 40% of the total forest land diverted in this period. Figure 1 shows a break up of the extent of forest land diverted for various categories of projects. The number of forest clearances pending for decision by the MoEF for applications made in the years 2012, 2011 and 2010 are 197, 129 and 48 respectively. [i]
Source: “Environmental Clearance accorded from 13.07.2011 to 12.07.2012”, October 12, 2012, MoEF.
[1] MoEF, Rajya Sabha, Unstarred Question no. 2520, September 4, 2012
