The finance ministry releases the first batch of funds to states under the program to increase investment

The finance ministry releases the first batch of funds to states under the program to increase investment

“In view of a higher multiplier effect of capital expenditure and to provide the much-needed resources to the state in the wake of 2nd wave of the COVID-19 pandemic, the scheme ‘Special Assistance to States for Capital Expenditure for 2021-22′ was launched on 29th April, 2021,” the finance ministry said in a statement on Saturday.

Bihar, Chhattisgarh, Himachal Pradesh, Madhya Pradesh, Maharashtra, Punjab, Sikkim and Telangana will initially benefit from the scheme under which 50-year interest free loans for capital expenditure up to Rs15,000 crore will be provided to states in FY22.

Highlights

  • Under the scheme for FY22, about Rs2,600 crore will be provided to northeast and hill states. Of this, Assam, Himachal Pradesh and Uttarakhand will get Rs400 crore each while the rest in this group have been allocated Rs200 crore each. About Rs7,400 crore has been allotted for rest of the states in proportion to their share of central taxes as per the award of the 15th Finance Commission for FY22. The rest Rs5,000 crore has been earmarked for providing incentives to states for monetisation/recycling of infrastructure assets and disinvestment of state PSEs on a first come first served basis. 

  • A similar scheme was announced as part of the Aatma Nirbhar Bharat package in October last year to boost capital expenditure by state governments facing difficult financial environment due to a shortfall in tax revenue arising from the covid-19 pandemic. As part of the scheme, Rs12,000 crore was earmarked for FY21 and a sum of Rs11,830 crore was released to the states.

“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 under the scheme by the Government of India shall be used for new and ongoing capital projects, for long term benefit to the State. The funds may also be used for settling pending bills in ongoing capital projects,” finance ministry had said.

“States will receive interest free 50 years loan ranging from 33% to 100% of the amount realised by them, through assets monetization, listing and disinvestment,” the finance ministry had said in a statement in April.

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