NEW DELHI: The Centre is considering using the Rs 20,000 crore ‘flexible fund’ allocated to NITI Aayog to meet the demand of special category states as well as compensate states for the financial loss they claim to have incurred following the recommendations of the 14th Finance Commission The sub-group of chief ministers chaired by Madhya Pradesh chief minister Shivraj Singh Chouhan is finalising its recommendations for funding pattern of over two dozen centrally sponsored schemes and its report could suggest utilisation of this fund to bridge the deficit claimed by states in implementing the social sector schemes, a senior government official told ET. The report is expected to be submitted to Prime Minister Narendra Modi in June.Most of the special category status states have opposed the 14th Finance Commission’s recommendation to do away with the distinction between them and the other states, said the official, requesting not to be named.“Besides, states like Bihar and Rajasthan have said that they are facing huge financial deficits following the recommendations of the commission, making it difficult for them to run the social sector schemes,” the official said.According to the official, the subgroup of chief ministers is looking into all these aspects and its recommendations are expected next month. “Considering the limited fiscal space, the ‘flexible fund’ of Rs 20,000 crore available with NITI will be used for special category states and some special schemes of the government,” he said. The issue was first raised by Bihar chief minister Nitish Kumar during his meeting with PM Modi, after which the state’s chief secretary wrote to Arvind Panagariya, the vice chairman of NITI Aayog, urging him to make tangible and positive efforts to meet its demand.Rajasthan, a BJP-ruled state, had also raised the issue at the preliminary meeting of the sub-group, saying that the state has seen a deficit of at least Rs 5,000 crore, making it difficult to implement the schemes.Besides, chief ministers of the seven northeastern states and Sikkim have jointly adopted a resolution to oppose any move by the Centre to abolish the special category status to the backward states, saying it will deprive them of huge additional central funds.The resolution, urging immediate intervention, has been submitted to the PM. Following this, finance ministry officials made a detailed presentation to Rajasthan chief minister Vasundhara Raje in the presence of Aayog officials and Madhya Pradesh chief minister Shivraj Singh Chouhan last week, to help the subgroup firm up its views on how best to address the demand of some of the states as well as the new fund sharing pattern between Centre and states. Raje is part of the sub-group of 11 chief ministers headed by Chouhan.Eleven states have been accorded special category status owing to their special needs. The tag was first given to Assam, Jammu & Kashmir andNagaland in 1969 after the Fifth Finance Commission recommended additional assistance to some disadvantaged states in the form of central assistance and tax holidays. At present, Arunachal Pradesh , Assam, Himachal Pradesh , Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland , Sikkim, Tripura and Uttarakhand have the special category tag.