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Finance Ministry to provide Rs 15,000 cr to states for capital expenditure

Friday, 30 Apr 2021
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The Ministry of Finance, government of India, has decided to provide an additional amount of upto Rs 15,000 crore to states as interest-free 50-year loan for spending on capital projects.  
 
The Department of Expenditure has issued fresh guidelines in this regard on the Scheme of Financial Assistance to States for Capital Expenditure for FY22.  
 
The Finance Minister had in her budget speech announced that the Centre will take measures to nudge states to spend more on infrastructure and incentivise disinvestment of their public sector enterprises. 
 
Capital expenditure creates employment, especially for poor and unskilled, has a high multiplier effect, enhances future productive capacity of the economy, and results in a higher rate of economic growth. Therefore, the Central government has decided in 2020 to launch a Scheme for Special Assistance to States for Capital Expenditure.   
 
Under the Scheme, financial assistance is provided to thestate governments in the form of 50-year interest free loan. An amount not exceeding Rs 12,000 crore was earmarked for the Scheme for FY21, and a sum of Rs 11,830.29 crore was released to the states. 
 
In view of the positive response to the Scheme and considering the requests of the state governments, the Centre has decided to continue the Scheme in FY22. The Scheme for Special Assistance to States for Capital Expenditure for 2021-22 has three parts. 
 
Part-I of the Scheme is for the North-East and hill states and an amount of Rs 2,600 crore has been earmarked for this part. Out of this, Assam, Himachal Pradesh and Uttarakhand will get Rs 400 crore each while the remaining states in this group have been allocated Rs 200 crore each. 
 
Part-II of the Scheme is for all other states not included in Part-I. An amount of Rs 7,400 crore is earmarked for this part. This amount has been allocated amongst these states in proportion to their share of central taxes as per the award of the 15th Finance Commission for 2021-22. 
 
In Part-III the Scheme is for providing incentives to the states for monetisation/recycling of infrastructure assets and disinvestment of the State Public Sector Enterprises (SPSEs). An amount of Rs 5,000 crore is allocated for this part of the Scheme. Under this part, the states will receive interest-free 50 years loan ranging from 33 percent to 100 percent of the amount realised by them, through assets monetisation, listing and disinvestment. 
 
Monetisation of assets unlocks their value, eliminates their holding cost and enables scarce public funds to be deployed to new projects, thus speeding up implementation of the National Infrastructure Pipeline (NIP). 
 
The funds provided to the states under the Scheme by the government of India will be used for new and ongoing capital projects, for long term benefit to the states. The funds may also be used for settling pending bills in ongoing capital projects. 
 
 
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