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Monday, 10 May 2021
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Centre to disburse Rs 15,000 cr to states for capital expenditure in FY22

Multi-Sector
 
The Ministry of Finance, government of India, has decided to provide an additional amount of up to Rs 15,000 crore to states as interest-free 50-year loan for spending on capital projects. Fresh guidelines have been issued in this regard on the ‘Scheme of Financial Assistance to States for Capital Expenditure’ for FY22by the Department of Expenditure. The Centre will take measures to push states to spend more on infrastructure and incentivise disinvestment of their public sector enterprises.
 
Capital expenditure creates employment, especially for the 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, despite the adverse financial position of the Central government, it was decided in 2020 to launch a ‘Scheme for Special Assistance to States for Capital Expenditure’. The scheme was announced by the Ministry of Finance as part of the Aatmanirbhar Bharat package in 2020. 
 
Under the Scheme, financial assistance is provided to the state 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. This helped to sustain state-level capital expenditure in the pandemic year.
 
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, which has three parts:
 
Part-I is for the North-East and Hill states and an amount of Rs 2,600 crore has been earmarked. 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 is for all other states not included in Part-I. An amount of Rs 7,400 crore is earmarked. 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 FY22.
 
Part-III is for providing incentives to 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. Under this part, the states will receive interest-free 50-year loan ranging from 33 percent to 100 percent of the amount realised by them, through assets monetisation, listing and disinvestment.
 
The monetisation of assets unlocks their value, eliminates holding cost and enables scarce public funds to be deployed to new projects, thus speeding up implementation of the National Infrastructure Pipeline.
 
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.
 
Source- pib.gov.in
 
The capital expenditure projects have been approved in diverse sectors of the economy, like Health, Rural Development, Water Supply, Irrigation, Power, Transport, Education, Urban Development. All the states except Tamil Nadu have availed benefits of the newly-announced Scheme.
 
 
 
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