Govt to provide Rs 15,000 crore to states for capital expenditure

This is an interest-free 50-year loan for spending on capital projects.

The Centre on Friday announced decision 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 for financial year 2021-22, according to an official statement released by the Ministry of Finance.

Capital expenditure creates employment, especially for the poor and unskilled, has a high multiplier effect, enhances the future productive capacity of the economy, and results in a higher rate of economic growth.

Thus despite adverse financial position of the Central government, it was decided last year to launch a scheme for special assistance to states for capital expenditure.

Under the scheme, financial assistance is provided to state governments in the form of 50-year interest free loan. An amount not exceeding Rs 12,000 crore was earmarked for 2020-21 and a sum of Rs 11,830.29 crore was released.

This helped to sustain state level capital expenditure in the pandemic year. "In view of positive response to the scheme and considering requests of state governments, the government has decided to continue the scheme in 2021-22.

The first part of scheme is for North-east and hill states and an amount of Rs 2,600 crore has been earmarked. Assam, Himachal Pradesh and Uttarakhand will get Rs 400 crore each while remaining states in this group have been allocated Rs 200 crore each.

The second part of scheme is for all other states with an amount of Rs 7,400 crore. This amount has been allocated among states in proportion to their share of central taxes as per the award of 15th Finance Commission for 2021-22.

The third part of scheme is for providing incentives to states for monetisation or recycling of infrastructure assets and disinvestment of state public sector enterprises. An amount of Rs 5,000 crore is allocated. States will receive interest-free 50-year loans ranging from 33 to 100 per cent 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 the implementation of the National Infrastructure Pipeline.

Funds provided to the states will be used for new and ongoing capital projects. The funds can also be used for settling pending bills in ongoing capital projects.