Bihar Presses for Special Status Before 16th Finance Commission

The Nitish Kumar-led government in Bihar renewed its push for special category status (SCS) on Thursday, presenting its case to the 16th Finance Commission during the panel’s ongoing state tour. The demand, a long-standing plea for greater financial aid from the Centre, was laid out in a detailed memorandum delivered in the presence of Chief Minister Kumar, his deputies, and senior officials.

Arvind Panagariya, the commission’s chairman and a prominent economist, acknowledged the request but clarified its limits. “This is not something the Finance Commission has jurisdiction over,” he told reporters in Patna, noting that the SCS framework dissolved with the Planning Commission in 2015—replaced by NITI Aayog, where he served as inaugural vice chairman. “At the moment, no state holds special category status,” he added, recalling Bihar’s persistent appeals from his NITI Aayog days.

Kumar expressed optimism about Panagariya’s leadership, citing his familiarity with Bihar’s socio-economic challenges as Nalanda University’s chancellor. The state seeks SCS to unlock benefits like higher central funding—historically up to 90% for schemes versus 60-75% for others—and tax breaks to spur development. Bihar’s pitch leans on its economic lag, despite a 10.6% GDP growth in 2022-23, outpacing the national 7.2%.

Panagariya highlighted other concerns raised by Bihar and 16-17 states, including a call to raise their share of central tax proceeds from 41% to 50%. He also addressed the exclusion of cess and surcharge revenues from the divisible pool, a constitutional norm Bihar contests. “Any change requires a two-thirds parliamentary majority,” he said, defending the Centre’s fiscal flexibility for emergencies like war.

With 20 states covered since June 2024, the commission aims to submit its report by October 31, 2025. On Bihar’s demands, Panagariya remained noncommittal: “All five members will deliberate. We can’t say what we’ll do yet.”