About the Scheme
27 States avail benefits of the Scheme for Special Assistance to States for Capital Expenditure. All the States except Tamil Nadu have availed benefits.
Need for the scheme
Most of the states facing difficultly due to the shortfall in tax revenue arising from the COVID 19 pandemic. This will affect overall economy of India.
How this scheme helps ? Capital Expenditure has a higher multiplier effect in enhancing the future productive capacity of the economy and results in a higher rate of economy growth.
The capital expenditure projects have been approved in various sectors of economy such as Health, Rural Development, Water Supply, Irrigation, Power, Transport, Education, Urban Development.
The Budget estimate of the government’s capital expenditure for the year
- 2020-21 was Rs 1,084,748 crore.
- The revised estimates of capital expenditure for the 2019-20 Budget came at Rs 1,059,472 crore
- The actual for the 2018-19 Budget stood at Rs 915,670 crore.
Key Facts
Aim of the Scheme : For boosting capital expenditure by the State Governments who are facing difficult financial environment this year due to the shortfall in tax revenue arising from the COVID 19 pandemic.
- Special Assistance to States for Capital Expenditure was announced by the Ministry of Finance as a part of the Aatmanirbhar Bharat package.
- All the States except Tamil Nadu have availed benefits of the newly announced scheme.
- So far capital expenditure proposals of Rs. 9,879.61 crore of 27 States have been approved by the Ministry of Finance.
- An amount of Rs. 4,939.81 crore has already been released to the States as the first instalment under the scheme.
- The Scheme has three parts :
- Part –I of the scheme
- It covers the north-eastern region.
- Under this part, Rs.200 crores is allocated to 7 north-eastern States (Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim and Tripura).
- In view of higher population and geographical area, Assam has been allocated Rs.450 crores under the scheme.
- Part-II of the Scheme
- all other States not included in Part-I.
- An amount of Rs.7,500 crores 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 15th Finance Commission for the year 2020-21.
- Part-III of the Scheme
- For pushing various citizen-centric reforms in the States.
- Under this Part, an amount of Rs.2000 crores is earmarked.
- This amount will be 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 17th May, 2020 regarding reform linked additional borrowing permissions.
- The Four reforms are : One Nation One Ration Card, Ease of doing Business Reform, Urban Local Body/ Utility Reform and Power Sector Reform.
- Part –I of the scheme
- Allocation for UP and Bihar stood high at 1501 crore and 843 crore.
What is a capital expenditure of government ?
- Money spent by the government on the development of machinery, equipment, building, health facilities, education, acquiring fixed assets like land and investment that provides profit in the long run.
- Also repayment of loan is also capital expenditure, as it reduces liability.
- Besides the Capital spending is associated with investment or development spending
Revenue Expenditure Vs Capital Expenditure
- Revenue expenditure is one that neither creates assets nor reduces any liability of the government.
- Some examples are salaries of employees, pension, interest payment on past debt, subsidies, etc.
Recent Updates on the scheme
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. Read Details Here : Capital Expenditure for States : 15,000 crore
Source : PIB
Fore More Schemes : Click Here
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[…] 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 […]