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Meaning and history of the term SCS

• SCS is a classification given by Centre to assist in the development of those states that face geographical & socio-economic disadvantages like hilly terrains, strategic international borders, economic & infrastructural backwardness and non-viable state finances.
• Introduced in 1969.
• 5th Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks.
• National Development Council grants the status of Special Category States.
• Initially three states Assam, Nagaland and Jammu & Kashmir.
• Since then eight more have been included – Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand.
• Direct transfers subsequently abolished in 2013–14.
• In 2013, Centrally Sponsored Schemes (CSS) were restructured into 66 schemes, including 17 flagship programmes with significant outlays.
• In 2016, CSS restructured into only 28 schemes.
• From 2017–18, the distinction between plan and non-plan expenditure removed,
• Therefore the Gadgil formula is a thing of the past

The criteria for granting special status:

• Hilly and difficult terrain
• Low population density or sizeable share of tribal population
• Strategic location along borders with neighbouring countries
• Economic and infrastructural backwardness
• Non-viable nature of state finances.

Advantages of getting special category status

• Preferential treatment in federal assistance and tax break
• Significant excise duty concessions.
• An interest-free loan with a rationalization of public expenditure based on the growth enhancing sectoral allocation of resources.
• SCS don’t have a hard budget constraint as the central transfer is high.
• SCSs avail the benefit of debt swapping and debt relief schemes (through the enactment of Fiscal Responsibility and Budget Management Act) which facilitate reduction of the average annual rate of interest.
• 30% of the Centre’s gross budget goes to the SCSs.
• In centrally sponsored schemes and external aid special category states get it in the ratio of 90% grants and 10% loans.
• Income tax holidays for 10 years for setting up new industries, extendable by a further period of five years upon “substantial expansion” of the existing units.
• Unspent money does not lapse and gets carry forward.

Concerns regarding SCS

• In the absence of the market, infrastructure, especially power, entrepreneurial skills and local resources, these incentives had hardly helped these states to industrialise.
• Not much economic progress has been noticed among SCS.
• Overwhelmingly dependent on central funding.
• Benefits flow regularly without any accountability or performance monitoring of the states.
• The amount of proceeds that states receive has increased after the 14th finance commission. So the structure does not seem to have any specific relevance in present context.
• SCS has been reduced to a political rallying point.
• Benefit of SCS may act as a stimulus but rest depends on the individual state policy.

14th Finance Commission on SCS

• The 14th FC does not make any mention of SCS.
• Its recommendations have been inferred as removing SCS.
• FC provided a fixed share of states in the net proceeds of the shareable central taxes at 42%.
• It has been interpreted as removing the distinction between general states and SCS and grant funds on the basis of backwardness of states.
• The interstate inequalities to be addressed through adequate tax devolutions and grants.
• Only SCS status was restricted to the states of North-east and three hill states.
• Under FC, some states to receive revenue deficit grants.
• States now have much more fiscal space to spend on their own priorities, instead of depending on the centre.
  

Fiscal Cooperative Federalism

• The taxes are divided among the states on the principles of equity and efficiency.
• From the 6th FC onwards, the FCs recommended only non-plan grants.
• The plan component was under the Planning Commission.
• Most of the discretionary transfers were made via the centrally sponsored schemes (CSS)
• Large part of the total transfers were made outside the state budgets, by direct transfer of funds from the Consolidated Fund of India to the implementing agencies in the states.
• Discretionary direct transfers have been abolished now.
• CSS reduced in number and restructured
• The distinction between plan and non-plan expenditure is no more.
• The NCA has also since been done away with.

Criticism received by the 14th FC

• The 14th FC attracted severe criticisms on grounds of equity and efficiency.
• Equalisation, equity and efficiency have always guided FC transfers
• It ensured that same standards of delivery of public services extended to all states
• This practice was aimed to prevent economic migrations across states.
• But there are now no efficiency criteria for the transfers.
• States, especially poor states, that have kept within their Fiscal Responsibility and Budget Management Act (FRBM) limits, have been made to suffer a cut in their shares instead of being rewarded for maintaining fiscal discipline.
• Even when these states controlled spending at the cost of limiting their capital
  borrowings despite huge infrastructure deficits.
• But there were no rewards for resisting populism.

But are SCSs really suffering?

• Whether there has been a reduction in the resources of SCSs?
• Whether SCSs have managed to retain their relative advantages vis-a-vis other states?
• For the SCSs as a whole, the total transfers during the first year under the XIV-FC over the previous year had actually increased by 24.7%, more than most other states.
• The tax devolutions for the SCS increased by almost 90%.
• The shares of SCS did not suffered any cut.
• They had in fact registered much higher increases than under the previous commissions
• Regarding the relative advantages enjoyed by the SCS, the latest restructuring of the CSS had made an important distinction between these and the other states, in terms of the funding pattern of these schemes.
• For the “core of the core” schemes, it envisaged that the existing funding patterns would continue, which is 90:10 for the SCS between the centre and states, while other states have to bear a higher proportion of expenditure on their own.
• For the “core” schemes, the restructured CSS states that the 90:10 formula between the centre and states would apply “for the 8 North Eastern States and 3 Himalayan States,” while it would be 60:40 for the other states.
• Thus, the SCS continue to retain their relative advantages over the other states.
• In other words, the category is far from being a thing of the past.
  

Revisiting Special Category

• The benefits of SCS are still there
• Therefore it is important to correct the flaws in the mechanism.
• There is a need to address the deep-rooted structural weaknesses that afflicted SCSs.
• Re-examine the continuation of the SCS a state in perpetuity.
• Adopting a target-based, time-bound arrangement that is focused on accountability, performance, and monitoring of achievements, with specific performance goals to be achieved by the beneficiary states for the benefits to continue.
• We need a strategy in which funding would be just one essential element and not the most important part.
• SCSs need supporting institutional set-up adequate to guide them towards predefined goals.
• Monitoring and accountability and granting of the SCS to a state should be through performance expectation.

Why in News?

In June 2018, The 5G committee of the Telecom Ministry recommended that 6,000 MHz of spectrum can be made available without delay for the next generation 5G mobile service

About 5G

• 5G is the fifth generation mobile network.
• It’s a unified platform which is much more capable than previous mobile services with more capacity, lower latency, faster data delivery rate and better utilisation of spectrum.
• The standards for the usage of 5G are defined and driven by 3rd Generation Partnership Project (3GPP).

Timeline: Evolution from 1G to 5G

• 1G: Launched in the 1980s. Analog radio signals and supported only voice calls.
• 2G: Launched in the 1990s. Uses digital radio signals and supported both voice and data transmission with a BandWidth(BW) of 64 Kbps.
• 3G: Launched in the 2000s. With a speed of 1 Mbps to 2 Mbps it has the ability to transmit telephone signal including digitised voice, video calls and conferencing.
• 4G: With a peak speed of 100 Mbps-1 Gbps it also enables 3D virtual reality.
• 5G: with a speed of more than 1Gbps,it is capable of connecting entire world without limits.

Salient features

• Capability: 5G will provide much faster mobile broadband service as compared to the previous versions and will provide support to previous services like mission critical communication and the massive Internet Of things(IoT).
• Speed: With peak delivering rate of up to 20 Gbps and an average of 100Mbps, it will be much faster as compared to its predecessors.
• Capacity: There will be up to 100 x increase in traffic capacity and network efficiency.
• Spectrum usage: Will provide better usage for every bit of spectrum, from low bands below 1 GHz to high bands.
• Latency: It’s expected to have lower latency with better instantaneous, real-time access of the data.
• The 5G, like 4G LTE, also uses Orthogonal Frequency Division Multiplexing(OFDM) but the new 5G NR(New Radio)air interface will enhance OFDM and provide better flexibility in data delivery.

Applications Of 5G technology

• High-Speed mobile network: 5G will revolutionize the mobile experience with supercharged wireless network. Compared to conventional mobile transmission technologies, voice and high-speed data can be simultaneously transferred efficiently in 5G
• Entertainment and multimedia : 5G can provide 120 frames per second, high resolution and higher dynamic range video streaming without interruption. Audiovisual experience will be rewritten after the implementation of the latest technologies powered by 5G wireless. Augmented Reality and virtual Reality services will be better experienced over 5G.
• Internet of Things : IoT applications collects huge amount of data from millions of devices and sensors and thus requires an efficient network for data collection, processing, transmission, control and real-time analytics which 5G network is a better candidate.

• Smart cities : Smart city application like traffic management, Instant weather update, local area broadcasting, energy management, smart power grid, smart lighting of street, water resource management, crowd management, emergency response etc can use a reliable 5G wireless network for its functioning.

• Smart farming : 5G technology will be used for agriculture and smart farming in the future. Using smart RFID sensors and GPS technology, farmers can track the location of livestock and manage them easily. Smart sensors can be used for irrigation control, access control and energy management.

• Mission critical applications : Like telemedicine services, remote control of critical infrastructure and vehicles. It has the potential to transform industries with highly reliable, low latency link.

High-Level 5G India 2020 forum

Government has constituted High-Level 5G India 2020 Forum with three Secretaries of key Ministries/Departments Telecom, Meity and DST, and also comprising renowned experts. The primary aims of the forum are:

• early deployment of 5G in India.
• A globally competitive product development and manufacturing ecosystem targeting 50% of India market and 10% of global market over next 5 to 7 years.

Conclusion

The new 5G technology is expected to launch at the beginning of 2019. With the government push for Digital India, the 5G technology can be a game changer. It can help in better service delivery, faster access to services and deeper penetration of digital services