"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 union government is reportedly considering a legislation to create anti-corruption units both at the centre and the states. Such institutions were first conceptualized by the Administrative Reforms Commission (ARC) headed by Morarji Desai in its report published in 1966. It recommended the creation of two independent authorities - the Lokpal at the centre and the Lokayuktas in the states. The first Lokpal Bill was introduced in Parliament in 1968 but it lapsed with the dissolution of Lok Sabha. Later Bills also met a similar fate. Though the Lokpal could not be created as a national institution, the interest generated led to the enactment of various state legislations. Maharashtra became the first state to create a Lokayukta in 1972. Presently more than 50% of the states have Lokayuktas, though their powers, and consequently their functioning varies significantly across states. Existing institutional framework The Central Vigilance Commission (CVC) and the Central Bureau of Investigation (CBI) are the two cornerstones of the existing institutional framework. However, the efficacy of the current system has been questioned. [1] Though the CVC (set up in 1964) is an independent agency directly responsible to the Parliament, its role is advisory in nature. It relies on the CBI for investigation and only oversees the bureaucracy; Ministers and Members of Parliament are out of its purview. Thus, presently there is no authority (other than Parliament itself) with the mandate to oversee actions of political functionaries. At the state level, similar vigilance and anti-corruption organisations exist, although the nature of these organisations varies across states. Karnataka Lokayukta Act The Karnataka Lokayukta is widely considered as the most active among the state anti-corruption units. [1] It was first set up in 1986 under the Karnataka Lokayukta Act, 1984. The Act was recently amended by the state government following the resignation of the Lokayukta, Justice Santosh Hegde. Justice Hegde had been demanding additional powers for the Lokayukta - especially the power to investigate suo-motu. Following the amendment, the Lokayukta has been given the suo motu powers to investigate all public servants except the CM, Ministers, Legislators and those nominated by the government. Following are the main provisions of the Karnataka Lokayukta Act:
The forthcoming Ordinance/ Bill Given that a Lokpal Bill is on the anvil, it might be useful at this point to enumerate some metrics/ questions against which the legislation should be tested:
What do you think? Write in with your comments. Notes: [1] Report of the Second Administrative Reforms Commission (ARC), 'Ethics in Governance' (2007) [2] Additional reading: An interview with the Karnataka Lokayukta
