Finance ministry to give additional Rs 15,000 crore to states as interest-free 50-year loan to spend on capital projects

The Special Assistance to States for Capital Expenditure for 2021-22 scheme has three parts, including linkage of asset monetisation with funds released by the Centre

Nirmala Sitharaman.: File picture

Special Correspondent   |   TT  |  New Delhi   |  01.05.21: The finance ministry has said it will give an additional Rs 15,000 crore to the states as interest-free 50-year loan to spend 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 scheme has three parts, including linkage of asset monetisation with funds released by the Centre.

Aditi Nayar, chief economist, Icra, said, “Higher capital spending by the Centre and the state governments remains one of the upsides to the GDP growth expected in fiscal 2021-22. The additional funding under the interest-free loan to states for capex is welcome, despite its modest outlay.”

“The novel aspect this time is that it nudges states to go in for sale of assets. 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. It will be interesting to see how states fare on this count as some of them have been talking of such sales in the past but have not taken affirmative action in a significant way,” said Madan Sabnavis, chief economist, Care Ratings.

Part one of the scheme relates to the North East and hill stóates and an amount of Rs 2,600 crore has been earmarked for this. Part two is for the states not included in part one. An amount of Rs 7,400 crore has been earmarked for this part.

Part three of the scheme provides incentives to states for monetisation/recycling of infrastructure assets and disinvestment of state public sector enterprises. About Rs 5,000 crore has been allocated for this part of the scheme.