The finance minster on Friday stated that the centre will provide additional ₹15000 crore to states as an interest free 50 year loan to spend on capital expenditure including ₹5,000 crore if states undertake asset monetisation and divestment of public sector enterprises.
“In view of the positive response to the scheme and, considering the requests of state governments, the government has decided to continue with the scheme in 2021-22. The department of expenditure has issued fresh guidelines in this regard on the ‘Scheme of Financial Assistance to States for Capital Expenditure’ for the financial year 2021-22. The finance minister had in her budget speech announced that the Centre would take measures to nudge states to spend more on infrastructure and to incentivise disinvestment of their public sector enterprises,” the finance ministry said in a statement.
In this scheme for special assistance to states for the year 2021-22, ₹2,600 crore will be provided to North-East and hill states while Assam, Himachal Pradesh and Uttarakhand will get ₹400 crore, each, the remaining states have been allocated ₹200 crore each.
“An amount of Rs 5,000 crore is allocated for this part of the scheme. Under this part, states will receive interest free 50 years loan ranging from 33 per cent to 100 per cent of the amount realised by them, through assets monetisation, listing and disinvestment,” the ministry added.
The ministry further added that ₹7,400 crore has been allotted for other states in proportion to their share of central taxes, as per the requisition announced by the 15th Finance Commission for 2021-22.
A similar scheme was announced last October as part of the Atmanirbhar Bharat scheme to help boost capital expenditure of the state governments where ₹12,000 crore was earmarked for the scheme for 2020-21, and ₹11,830 crore was released to states. This helped to sustain state-level capital expenditure in the pandemic year.
Capital expenditure creates employment, especially for the poor and unskilled,enhancing the future productive capacity of the economy and thus resulting in higher rate of economic growth. These funds shall be used for new and ongoing capital projects and settling pending bills in ongoing capital projects.