The Union Finance Ministry has determined to supply an extra quantity of upto Rs 15,000 crore to states as interest-free 50-year loans for spending on capital tasks. The Department of Expenditure has issued recent tips on this regard on the “Scheme of Financial Assistance to States for Capital Expenditure” for the monetary 12 months 2021-22.
Under this Scheme, monetary help is being offered to the state governments within the type of 50-year curiosity free mortgage. Earlier in October final 12 months, finance minister Nirmala Sitharaman had introduced Rs 12,000 crore interest-free 50-year mortgage to states for capital tasks in a bid to spice up the financial system. The mortgage was to be spent totally on new or ongoing capital tasks. This was a part of the measures introduced by the Narendra Modi govt to stimulate the financial system following the Covid-19 lockdown.
The finance ministry mentioned that out of Rs 12,000 crore introduced final 12 months, Rs.11,830.29 crore was launched to the states. This helped to maintain state degree capital expenditure within the pandemic 12 months.
The new scheme for particular help to states for capital expenditure for 2021-22 has three components. The half 1 is for the North-East and hill states and an quantity of Rs 2,600 crore has been earmarked for this half. Out of this, Assam, Himachal Pradesh and Uttarakhand will get Rs 400 crore every whereas remaining states on this group have been allotted Rs 200 crore every.
The half 2 is for all of the remaining states, and the entire quantity allotted for them is Rs 7,400 crore. This quantity has been allotted amongst these states in proportion to their share of central taxes as per the award of the fifteenth Finance Commission for the 12 months 2021-22.
The half 3 of the scheme is for offering incentives for monetization/recycling of infrastructure belongings and disinvestment of the State Public Sector Enterprises (SPSEs). An quantity of Rs 5,000 crore is allotted for this a part of the scheme. Under this half, states will obtain curiosity free 50 years mortgage starting from 33% to 100% of the quantity realised by them by way of belongings monetization, itemizing and disinvestment.
The finance ministry has mentioned that the funds offered to the states beneath the scheme shall be used for brand new and ongoing capital tasks, for long run profit to the state. The funds may be used for settling pending payments in ongoing capital tasks.
This scheme will assist the states in boosting their financial system on the time of Covid-19 pandemic by making capital expenditure on creating infrastructure. Capital expenditure creates employment, particularly for the poor and unskilled. Moreover, it has a excessive multiplier impact, because it enhances the longer term productive capability of the financial system, and leads to a better fee of financial progress. Therefore, regardless of the adversarial monetary place of the Central Government, it was determined final 12 months to launch a “Scheme for Special Assistance to States for Capital Expenditure”, the finance ministry mentioned.