The correct option is that only two of the statements are correct. Statement 1 is true, as the President of India, under Article 244 of the Constitution, can declare a Scheduled Area through an order. Statement 3 is also correct, as Chief Ministers are indeed required to submit annual reports on the administration of Scheduled Areas. However, Statement 2 is incorrect; while Scheduled Areas can comprise various administrative units, they are not strictly defined at the district level, and clusters of villages do not form the lowest unit for the Scheduled Areas, which can also encompass entire blocks or other larger administrative units. This nuanced understanding of Scheduled Areas is critical for UPSC preparation, emphasizing constitutional provisions and the administrative intricacies involved.