Centre to give additional Rs 15,000 crore interest-free loan to states for capital projects

New Delhi, Apr 30 (PTI): The finance ministry on Friday said it will give an additional Rs 15,000 crore to the states as an interest-free 50-year loan for spending on capital projects in the current fiscal.

The Scheme for Special Assistance to States for Capital Expenditure for 2021-22 also includes incentives to states for monetising/ recycling of infrastructure assets and disinvestment of the State Public Sector Enterprises (SPSEs).

"The Ministry of Finance, Government of India has decided to provide an additional amount of upto Rs 15,000 crore to states as interest free 50 year loan for spending on capital projects," the finance ministry said in a statement.

The Scheme for Special Assistance to States for Capital Expenditure for 2021-22 has three parts, including linkage of asset monetisation with funds release by the Centre.
For the North-East and Hill States, the Centre has earmarked Rs 2,600 crore. Out of this, Assam, Himachal Pradesh and Uttarakhand will get Rs 400 crore each while remaining states in this group have been allocated Rs 200 crore each.

An amount of Rs 7,400 crore is earmarked for all other states. This amount has been allocated amongst these states in proportion to their share of central taxes as per the award of the 15th Finance Commission for the year 2021-22, the ministry said. The third part of the scheme is for providing incentives to States for monetisation/ recycling of infrastructure assets and disinvestment of SPSEs.

"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.

Finance Minister Nirmala Sitharaman in her 2021-22 Budget speech said that to incentivise states to take to disinvestment of their public sector companies, the Centre would work out an incentive package of central funds for states.

The government has budgeted to raise Rs 1.75 lakh crore through CPSE disinvestment in the current fiscal, over five times what it raised in the last financial year. ? The minister had also said that the Centre would work out specific mechanisms to nudge states to spend more of their budget on creation of infrastructure.

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, the ministry said.

Under the Scheme for Special Assistance to States for Capital Expenditure, financial assistance is provided by the Centre to the state governments in the form of 50-year interest free loan. As against Rs 12,000 crore earmarked for the scheme for the financial year 2020-21, a sum of Rs 11,830.29 crore was released to the states. "In view of the positive response to the scheme and considering the requests of the state governments, the government has decided to continue the scheme in the year 2021-22," the ministry said.

Capital expenditure creates employment, especially for the poor and unskilled, has a high multiplier effect, enhances the 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 last year to launch a "Scheme for Special Assistance to States for Capital Expenditure", it added.

Funds provided to the states under the scheme by the government shall be used for new and ongoing capital projects. The funds may also be used for settling pending bills in ongoing capital projects. 

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