The Ministry of Finance, government of India, has decided to provide an additional amount of up to Rs 15,000 crore to states as interest-free 50-year loan for spending on capital projects. Fresh guidelines have been issued in this regard on the ‘Scheme of Financial Assistance to States for Capital Expenditure’ for FY22by the Department of Expenditure. The Centre will take measures to push states to spend more on infrastructure and incentivise disinvestment of their public sector enterprises.
Capital expenditure creates employment, especially for the poor and unskilled, has a high multiplier effect, enhances future productive capacity of the economy, and results in a higher rate of economic growth. Therefore, despite the adverse financial position of the Central government, it was decided in 2020 to launch a ‘Scheme for Special Assistance to States for Capital Expenditure’. The scheme was announced by the Ministry of Finance as part of the Aatmanirbhar Bharat package in 2020.
Under the Scheme, financial assistance is provided to the state governments in the form of 50- year interest-free loan. An amount not exceeding Rs 12,000 crore was earmarked for the scheme for FY21, and a sum of Rs 11,830.29 crore was released to the states. This helped to sustain state-level capital expenditure in the pandemic year.
In view of the positive response to the scheme and considering the requests of the state governments, the Centre has decided to continue the Scheme in FY22, which has three parts:
Part-I is for the North-East and Hill states and an amount of Rs 2,600 crore has been earmarked. Out of this, Assam, Himachal Pradesh and Uttarakhand will get Rs 400 crore each while the remaining states in this group have been allocated Rs 200 crore each.