Projects of Rs.10,657 crore in 27 States have been approved so far under the “Scheme for financial assistance to States for capital projects”

Madhya Pradesh has become the first State to get additional funds for capital projects for successfully carrying out reforms in various citizen-centric areas.  The Department of Expenditure, Ministry of Finance has allocated additional Rs.660 crore to the State for capital expenditure for undertaking the One Nation, One Ration Card Reforms, Ease of Doing Business Reforms, and Urban Local Bodies Reforms.  The State has also completed a part of the fourth reform – the Power Sector reform.

A list of capital projects with estimated cost of Rs.660 crore was approved by the Department of Expenditure.  50% of the approved amount (i.e. Rs.330 crore) has also been released to the State as 1^st instalment for the approved projects.  This amount of Rs.660 crore is in addition to an amount of Rs.660 crore approved earlier for capital projects under Part-II of the scheme.

The scheme of “Special Assistance to States for capital expenditure” was announced by the Finance Minister on 12^th October, 2020 as part of Aatma Nirbhar Bharat package.  The Scheme is aimed at boosting capital expenditure by the State Governments who are facing difficult financial environment this year due to a shortfall in tax revenue arising from the COVID 19 pandemic.

Capital Expenditure has a higher multiplier effect, enhancing the future productive capacity of the economy, and results in a higher rate of economy growth.  Therefore, despite the adverse financial position of the Central Government, it was decided to extend a special assistance to the State Governments in respect of capital expenditure, in financial year 2020-21.

The scheme has got very warm response from the State Governments. So far capital expenditure proposals of Rs.10,657 crore of 27 States have been approved by the Ministry of Finance.  An amount of Rs.5,328 crore has already been released to the States as the first instalment under the scheme. State-wise allocation, approval granted and funds released is attached.  Tamil Nadu has not availed the benefit of the scheme.

The capital expenditure projects have been approved in diverse sectors of economy like, Health, Rural Development, Water Supply, Irrigation, Power, Transport, Education, Urban Development.

The Scheme has three parts.  Part–I of the scheme covers the north-eastern and hill States.  Under this part, Rs.200 crore is allocated to each of the 7 north-eastern States (Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim and Tripura) and Rs.450 crore is allocated to  each of the hill  States (Himachal Pradesh and Uttarakhand).  In view of higher population and geographical area, the State of Assam has been provided enhanced allocation of Rs.450 crore under the scheme.

Part-II of the scheme is, for all other States not included in Part-I. An amount of Rs.7,500 crore is earmarked for this part.  This amount has been allocated amongst these States in proportion to their share of central tax as per the interim award of the 15^th Finance Commission for the year 2020-21.

Part-III of the Scheme is aimed at pushing various citizen-centric reforms in the States.  Under this Part, an amount of Rs.2000 crore is earmarked.  This amount is available only to those States who carry out at least 3 out of the 4 reforms specified by the Ministry of Finance in its letter dated 17^th May, 2020 and send the recommendation for the same through the nodal ministry latest by 15^th February, 2021.  The 4 reforms are – One Nation One Ration Card, Ease of doing Business Reform, Urban Local Body/ Utility Reform and Power Sector Reform.

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RM/KMN