Economics Prelims 2021 Prelims cum Mains

Atmanirbhar: Finance Minister OKs Rs 9,800cr for 27 states

In News

  • 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.

Background

  • 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
    • 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
    • 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
    • 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.

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