Scheme of Financial Assistance to States for Capex

The Ministry of Finance recently announced that it is to provide Rs 15,000 crores to the states for their Capital Expenditure for 2021-22. This is being provided as interest free fifty-year loan to spend on capital projects. Fresh guidelines have been announced in this regard called the “Scheme of Financial Assistance to States for Capital Expenditure”.

About the Scheme

In 2020-21, Rs 12,000 crores was allocated for the scheme and Rs 11,830.29 crores was released to the states.

Part I of the Scheme

The Part I of the scheme is to be implemented in the North Eastern States and Hilly states of India. Around Rs 2,600 crores has been allocated for this part of the scheme. Of this Himachal Pradesh, Assam and Uttarakhand are to get Rs 400 crores each.

Part II of the scheme

Al the other states are included under this part of the scheme. Rs 7,400 crores has been allocated to these states. This fund is to be allocated in proportion to their share of central taxes as prescribed by the fifteenth commission of 2021-22.

Part III of the scheme

Under this part of the scheme, incentives are to be provided to the states for disinvestment of state public sector enterprises and for recycling or monetisation of infrastructure assets. In order to achieve this, Rs 5,000 crores have been allocated.

Benefits

The scheme will help to speed up the National Infrastructure Pipeline projects. It will help the states to settle the pending bills in the ongoing capital projects. Also, the funds provided under the scheme shall be used for new capital projects.

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