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State governments have received over ₹95,000 crore during April-February as special assistance to states for Capital Investment, Finance Ministry has reported. It also said some mandatory conditions have been brought in for Fiscal Year 2024-25
The revised estimate for such assistance is ₹1.05 lakh crore for the current fiscal while initially it was pegged at ₹1.30 lakh crore. The scheme was launched for the first time in fiscal year 2020-21 under which 50-year interest free loan is provided. For current Fiscal Year 2023-24, the Budget Estimate for the scheme was ₹1.30 lakh crore which was later revised to ₹1.05 crore.
Although no official reason was given but it is believed that some states could not fulfill the conditions for availing tied funds. Also, for untied funds a few states did not seek fund. All taken together, revised estimate was lowered by ₹25,000 crore.
Multiplier effect
The scheme basically works on the principle of multiplier effect as it is believed ₹1 spent as capital expenditure gives an impact of ₹3.
The scheme has eight parts, Part-I being the largest with allocation of ₹1-lakh crore and allocated amongst states in proportion to their share of central taxes & duties as per the award of the 15th Finance Commission. In Part–II of the scheme, an amount of ₹3,000 crore was set aside for providing incentives to states for scrapping of state government vehicles and ambulances, waiver of liabilities on old vehicles, providing tax concessions to individuals for scrapping of old vehicles and setting up of automated vehicle testing facilities.
Part–III & IV of the scheme aim at providing incentives to states for reforms in Urban Planning and Urban Finance. An amount of ₹15,000 crore was earmarked for Urban Planning Reforms, while additional ₹5,000 crore was for incentivising the states for making Urban Local Bodies creditworthy and improving their finances. The scheme also aims at increasing the housing stock for the police personnel and their families within the police stations in urban areas. An amount of . ₹2,000 crore is earmarked for this purpose under Part-V of the scheme.
Make in India
Another objective of the Scheme is to promote national integration, carry forward the concept of “Make in India” and promote the concept of “One District, One Product (ODOP)” through construction of Unity Mall in each State. An amount of . ₹5,000 crore was set aside for this purpose under the Part-VI of the scheme. Part-VII of the Scheme, with an allocation of ₹5,000 crore was for providing financial assistance to States for setting up libraries with digital infrastructure at Panchayat and Ward level for children and adolescents.
Now, for fiscal year 2024-25, the scheme has been redesigned with overall allocation of ₹1.30 lakh crore. Here ₹55,000 has been earmarked under Part-1 while ₹5,000 crore is under Part-II. Another ₹5,000 crore has been provided under Part-III which is basically for ‘Development of iconic Tourist Centres’. For next fiscal, two mandatory conditions include correct translation to local language about names and features of centrally sponsored schemes and deposit of central share of interest earned in SNA accounts till March 31 in the Consolidated Fund of India.
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