The Ministry of Finance, Government of India is set to provide an additional amount of INR 15,000 Crore to State Governments as Interest free 50-year loan for spending on Capital projects for the FY 2021-22.
- The loan will be provided to the States under ‘Scheme of Financial Assistance to States for Capital Expenditure’.
- It aims to nudge States to spend more on infrastructure and incentivize disinvestment of State Public Sector Enterprises (SPSEs).
- The Guidelines for the scheme were released by the Department of Expenditure, Ministry of Finance.
Components of the Scheme
The scheme for Special Assistance to States for Capital Expenditure for 2021-22 has 3 parts.
| Part | Amount Allocated | Details |
|---|---|---|
| Part-I | INR 2, 600 Crore for North-East and Hill States | i.Assam, Himachal Pradesh & Uttarakhand to get INR 400 Crore each.
ii.Other states will get INR 200 Crore each. |
| Part-II | INR 7, 400 crore for States not covered under Part-I | The amount has been allocated to these states in proportion to their share of Central Taxes.
(as per award of 15th Finance Commission for 2021-22) |
| Part-III | INR 5000 Crore to States for monetization/recycling of infrastructure assets & disinvestment of SPSEs. | States will get Interest free 50 years loan ranging from 33% to 100% of the amount realized by them through asset monetization, listing & disinvestment |
Key Points
i.These funds have been allocated to states for new and ongoing capital projects which will provide long term benefit to the state.
ii.The Allocation also includes incentives to states for monetization/recycling of infrastructure assets & disinvestment of SPSEs.
- Monetization of assets unlocks their value, eliminate their holding cost and enable scarce public funds to be deployed to new projects.
- It will speed up the implementation of the National Infrastructure Pipeline.
iii.The ‘Scheme for Special Assistance to States for Capital Expenditure’ was launched in 2020 to provide financial assistance for the states.
- Under the Scheme, Financial Assistance of INR 12,000 Crore was earmarked for providing to the State Governments during the FY 2020-21, out of which INR 11, 830.29 Crore was released.
Capital Expenditure
i.It includes funding for creation, acquisition of capital assets like infrastructure, construction of roads, building, machinery, railway line, airports.
- It creates employment for the poor and unskilled and enhances the future productive capacity of the economy.
- The Central Government has also budgeted to raise INR 1.75 Lakh crore through Central Public Sector Enterprise (CPSE) disinvestment during the FY 2021-22.
Recent Related News:
i.On March 29, 2021, President Ram Nath Kovind gave assent to National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021, which aims to establish the National Bank for Financing Infrastructure and Development (NBFID) as the principal Development Financial Institution (DFI) for Infrastructure financing in India.
About Ministry of Finance:
Union Minister – Nirmala Sitharaman (Rajya Sabha MP representing Karnataka)
Minister of State (MoS) – Anurag Singh Thakur (Lok Sabha MP, Constituency – Hamirpur, Himachal Pradesh)
