Centre gives Rs 15,000 crore in long-term loans to states for capex spending


The Finance Ministry on April 30 said it would provide Rs 15,000 crore worth of long-term loans to states for their capital expenditure needs. This would include around Rs 5,000 crore for incentivising states to carry out monetisation of their idle assets and divest their companies, an official statement said.

“The Ministry of Finance 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. The Department of Expenditure has issued fresh guidelines in this regard on the “Scheme of Financial Assistance to States for Capital Expenditure” for the financial year 2021-22,” said the press release.

This move follows a similar step taken last year, when as part of the ‘Aatmanirbhar Bharat’ set of announcements, the Centre provided Rs 12,000 crore as a 50-year loan to states to enable them to carry out capital expenditure work in a pandemic-hit year.

As part of her capital stimulus push in the budget, Finance Minister Nirmala Sitharaman had said: “We would also be providing more than Rs 2 lakh crore to states and autonomous bodies for their capital expenditure. We will also work out specific mechanisms to nudge states to spend more of their budget on creation of infrastructure.”

There was no clarity then on whether this amount will be in form of grants or loans. The first Rs 15,000 crore of that, as announced today, is in form of loans.

“To similarly incentivise states to take to disinvestment of their public sector companies, we will work out an incentive package of central funds for states,” the Finance Minister had added.

As per the statement, the scheme for “Special Assistance to States for Capital Expenditure for 2021-22” has three parts.

One part, worth Rs 2,600 crore is for northeast and hill states. 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, it said.

The second part is for the remaining states. “An amount of Rs 7,400 crore is earmarked for this part. 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,” it said.

The third part of this scheme is for providing incentives to states for monetisation/recycling of infrastructure assets and disinvestment of the state public sector enterprises (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 33-100 percent of the amount realised by them, through assets monetisation, listing and disinvestment,” it said.

“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 statement said.