- The Ministry of Finance has announced that all the States except Tamil Nadu have taken benefits of the recently announced scheme for “Special Assistance to States for Capital Expenditure”.
- Under the scheme, the Finance Ministry has approved Rs 9,879.61 crore worth capital expenditure proposals of 27 states. Of this, Rs 4,939.81 crore has been released as the first installment.
- The scheme for ‘Special Assistance to States for Capital Expenditure’, was announced in October 2020, as part of AatmaNirbhar Bharat package.
- The scheme is aimed at boosting capital expenditure by the state governments who are facing a difficult financial environment this year due to the shortfall in tax revenue arising from the COVID 19 pandemic.
- Capital Expenditure enhances the future productive capacity of the economy and leads to a higher rate of economy growth.
- Therefore, despite the weak financial position of the Central Government, it was decided to give a special assistance to the state governments for capital expenditure, in financial year 2020-21.
About: Scheme for Special Assistance to States for Capital Expenditure
- Under the scheme, the government will offer Rs 12,000 crore special interest-free 50-year loan to states, exclusively for capital expenditure.
- The capital expenditure projects have been approved in diverse sectors like, health, rural development, water supply, irrigation, power, transport, education, urban development.
- The funds, have to be spent by March 31, 2021 and can be used by states for ongoing and new projects and settling contractors’ bills on such projects.
- The funds provided to states will be over and above their borrowing ceilings.
Parts under the Scheme
- The scheme for “Special Assistance to States for Capital Expenditure” has three parts.
- Part-I of the scheme covers the north-eastern region. Under this part, Rs 200 crore is allocated to 7 north-eastern States (Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim and Tripura).
- Due to a higher population and geographical area, Assam has been allocated Rs 450 crore under the scheme.
- Part-II of the Scheme is for all other States not included in Part-I. An amount of Rs 7,500 crore is allocated for part-II of the scheme.
- This amount has been allocated amongst these States in proportion to their share of central tax for the year 2020-21, as per the 15th Finance Commission.
- Part-III of the Scheme is aimed at pushing various citizen-centric reforms in the States.
- Under this Part, an amount of Rs 2,000 crore is allocated. This amount will be available only to those states who carry out at least 3 out of the 4 reforms specified by the Ministry of Finance in May, 2020.
- The 4 reforms are – One Nation One Ration Card, Ease of doing Business Reform, Urban Local Body/ Utility Reform and Power Sector Reform.