The UPA government will have to turn down the recommendations of its own inter-ministerial group (IMG) to woo Bihar Chief Minister Nitish Kumar.
Yesterday, Kumar had said he would support any government at the Centre giving Bihar special category status.
Special category for Bihar would mean alteration of the current formula of 30 per cent loan and 70 per cent grant to 10 per cent loan and 90 per cent grant for centrally-sponsored schemes and external aid, besides fiscal concessions in tax breaks.
A special category status is accorded to a state on the basis of five conditions — hilly and difficult terrain, low population density and sizeable share of tribal population, strategic location along borders with neighbouring countries, economic and infrastructure backwardness and non-viable state finances.
On these grounds, an IMG, set up after the intervention of Prime Minister Manmohan Singh, rejected the Bihar government’s plea to grant it the status of a backward state.
Ravi Srivastava — professor at Jawaharlal Nehru University, and associated with the Planning Commission — told Business Standard that frontier and hilly states are given special category status, and even there the special dispensation has led to distortion in expenditure. On political compulsions prompting the Centre to award this status to Bihar, he said, “No. Where will you then stop? There are several claimants.”
Odisha, Rajasthan and Jharkhand have also demanded this status.
IMG had stated various reasons while rejecting Bihar’s demand.
On the criterion of a state having hilly and difficult terrain, the group had said Bihar was largely a part of Indo-Gangetic plain, though it does suffer from the annual cycle of floods in the rivers originating in the Himalayas. However, a similar terrain can be seen on large parts of other general category states such as Uttar Pradesh and West Bengal and flood-prone parts of Odisha, said the IMG, headed by then Planning Commission member-secretary Sudha Pillai.
On the non-viable nature of state finances, the IMG found that fiscal deficit stood at 1.82 per cent of state GDP in 2010-11 and 1.66 per cent in 2011-12. This was significantly lower than the average of non-special category states at 2.43 per cent and 2.51 per cent, respectively, during these two years.
Bihar has also demanded area-based special concessions. The panel rejected that on the grounds that it was not consistent with the proposed reforms under the Direct Taxes Code and the Goods and Services Tax.
However, the panel suggested extra financial support through flagship programmes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme and also a special plan under the Backward Region Grant Fund for addressing issues related to financial support to Bihar. The panel also endorsed the view that a special unit be set up in the Commission to exclusively deal with matters relating to the development of Bihar.
UPA’s estranged ally Trinamool Congress’ demand for a moratorium on interest payment for the Centre’s loans was rejected on the grounds that the Centre would have to accept similar demands from other states, analysts said.
So far, 11 states have been accorded this status: Arunachal Pradesh, Assam, Himachal Pradesh, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand.
