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Our Bureau

New Delhi , Dec. 22

The Union Cabinet on Thursday gave its approval to revert to the earlier dispensation for passing external assistance to Special Category States in the grant/loan ratio of 90:10.

The 12th Finance Commission had recommended that external assistance should be passed on to States on `back-to-back' basis retrospectively from April 1, 2005.

"Special category States said that they could not afford to find funds on back-to-back basis. Therefore only for special category States, this has been reverted to earlier pattern of 90 per cent grant and 10 per cent loan," Mr P. Chidambaram, Union Finance Minister, told reporters after a Cabinet meeting here on Thursday.

The decision would benefit Special Category States by reducing their debt liability.

Himachal Pradesh is the only Special Category State that has received external assistance on back-to-back basis from April 1, 2005. Himachal Pradesh would benefit from this decision as it had received loan of Rs 22.15 crore during 2005-06 on back-to-back basis and this would now be converted in grant/loan ratio of 90:10.

The Union Cabinet also gave its nod to set up joint electricity regulatory commission for Union Territories except the National Capital Territory of Delhi.

Insurance amendment

The Finance Minister also said that the comprehensive amendments to the Insurance laws have now been referred to a Group of Ministers (GoM).

Mr Chidambaram confirmed that one of the proposed amendments that the GoM would consider related to increasing foreign direct investment cap in insurance from 26 per cent to 49 per cent.

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