the PRS Blog

“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 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.

Reports suggest that the first reactor of the Kudankulam power plant is close to operational. With state discoms struggling, advocates of nuclear power see Kudankulam as a necessary boost to India’s struggling power sector.  The Kudankulam power plant will have two reactors.  At full capacity, the plant would produce 2 GW of energy, making it India’s largest nuclear plant, and significantly increasing India’s nuclear capacity (currently at 4.8 GW or 2.3% of  total capacity). Internationally, nuclear power plants contributed 12.3 % of the world’s electricity production in 2011.  In terms of number of nuclear reactors, India ranks 6th in the world with 20 nuclear reactors (in seven power stations across five states: Rajasthan, Uttar Pradesh, Gujarat, Karnataka and Tamil Nadu).  The Kudankulam power station would be Tamil Nadu’s second power station after the Madras Atomic Power Station (MAPS).

Tamil Nadu is struggling to meet electricity demand, recently moved the Supreme Court, asking the Centre for more power. Peak demand deficit (the difference between electricity supply and demand at peak periods) in the state was 17.5% in 2011-12.  The per capita consumption of electricity in the state was 1,132 kWh in 2009-10, significantly greater than the India average of 779 kWh.  Currently, electricity in Tamil Nadu is fueled by a mixture of coal (35% of capacity), renewable sources (42%) and hydro sources (12%).  A fully operational Kudankulam reactor would boost Tamil Nadu’s capacity by 6% (including state, private and centrally owned generating entities).

The interactive table below provides a state-level breakdown of key power sector indicators.  To view data in ascending or descending order, simply click the relevant column heading.  (For a detailed overview of the power sector and even more state-wise statistics, see here.)

Power statistics in the states

Source: Central Electricity Authority; Planning Commission; PRS.

Note: capacity for states includes allocated shares in joint and central sector utilities.

T&D (transmission and distribution) losses refer to losses in electricity in the process of delivery

Apropos Madhukar’s post on available information on the functioning of state legislatures, data on the number of days State Assemblies shows a mixed trend over the 2000 to 2010 period. However, most states uniformly under perform when it comes to number of days of sitting. (Spreadsheet with relevant data here)

As with Parliament, state assemblies are convened at the will of the executive. In comparison to the Lok Sabha, the state assemblies perform miserably. In any given year, most state assemblies do not sit for even half the number of the days clocked by the Lok Sabha.

Well, that is the number of seats to be reserved for women in Lok Sabha in the first round if the women’s reservation bill is passed.  The rules for determining number of seats to be reserved are as follows.

1. The Bill does not reserve one-third of seats on an All-India basis.  It reserves “as nearly as possible, one-third” of seats in each state.
2. Also, it reserves “as nearly as possible, one-third” of seats reserved for Scheduled Castes in any state for women, and similarly for ST women.  If any state/UT has only 1 seat in any of these categories, that seat will be reserved in the first election, and be open to men in the subsequent two elections.  If a state has 2 seats in any category, one of these will be reserved for women in the first election, the other in the second, and neither in the third election.  One of the two seats nominated for Anglo-Indians will be reserved after the first and second elections.
3. The reservation for general category seats will be done after following Rules 1 and 2 above.  However, if a state has one or two general category seats, they follow rules similar to that for SC and ST seats (cycling through three elections).

Example 1:  Puducherry has one general seat.  This will be reserved for women in the first election and open in second and third elections.

Example 2:  Manipur has two seats, of which one is reserved for STs.  Thus, both seats will be reserved in the first election and open in the second and third elections.

Example 3:  Delhi has seven seats:  six general and one SC.  In the each election 2 seats (seven divided by three, rounded to nearest integer) will be reserved.  In the first election, one general and one SC seat will be reserved, and in the next two elections, two general seats will be reserved.

We compute that this results in 192, 179 and 175 seats (out of 545) being reserved for women in the first three elections.

A similar computation shows that 1367, 1365 and 1364 (out of 4090 seats of the legislative assemblies of 28 states and Delhi) will be reserved for women in the first three elections.

Excel file with detailed computation is available here.