27 states availed “Special Assistance Scheme to States for Capital Expenditure”

New Delhi: All states except Tamil Nadu have taken advantage of the recently announced scheme of “Special Assistance to States for Capital Expenditure”. The scheme was announced by the Finance Minister on October 12, 2020 as a part of the Self Dependent India Package.

The scheme aims to boost capital expenditure by the state governments which are facing difficult financial conditions this year due to reduction in tax revenue due to the Covid-19 epidemic. Capital expenditure has a higher multiplier effect which increases the future productive capacity of the economy and results in a higher rate of economy growth. Therefore, despite the unfavorable financial condition of the Central Government, it was decided to provide specific assistance to the State Governments in respect of capital expenditure in FY 2020-21.

The scheme has received a very strong response from the state governments. So far, capital expenditure proposals worth Rs 9,879.61 crore have been approved by the Finance Ministry for 27 states. An amount of Rs 4,939.81 crore has already been released to the states as the first installment under the scheme. State-wise allocations, approved approvals and funds released are attached.

Capital expenditure projects have been approved in diverse sectors of the economy such as health, rural development, water supply, irrigation, electricity, transport, education, urban development.

The scheme has three parts. Part-1 of the Scheme covers the North Eastern Region. Under this part, seven states of Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim and Tripura have been allocated Rs 200 crore. Given the large population and geographical area, Assam has been allocated Rs 450 crore under the scheme.

Part-2 of the scheme is for all other states, which are not included in Part-1. An amount of Rs 7500 crore has been earmarked for this part. This amount has been allocated among these states in proportion to their share of central tax in line with the interim approval of the 15th Finance Commission for the year 2020-21.

Part-3 of the scheme aims to promote various public-centric reforms in the states. Under this part, an amount of Rs 2000 crores has been earmarked. This amount will be available only to those states that have implemented at least three of the four reforms specified by the Finance Ministry in its letter dated May 17, 2020, regarding additional borrowing permissions related to reforms. These four reforms – One Nation One Ration Card, Ease of Doing Business Improvement, Urban Local Bodies / Utility Reforms and Power Sector Reforms.