MP, AP to get additional financial assistance of Rs 1,004 crore for capex

Madhya Pradesh and Andhra Pradesh have become the first states to complete three out of four citizen-centric reforms stipulated by the Ministry of Finance.

The two states have completed the One Nation, One Ration Card reforms, Ease of Doing Business reforms, and Urban Local Bodies reforms, according to an official statement issued on Wednesday.

The Department of Expenditure has decided to provide additional financial assistance of Rs 1,004 crore to these states under the newly-launched scheme of ‘Special Assistance to States for Capital Expenditure.’

Andhra Pradesh will get an additional amount of Rs 344 crore while Madhya Pradesh has become entitled to receive Rs 660 crore for capital projects.

The scheme was announced by Finance Minister Nirmala Sitharaman on October 12 last year as part of Atmanirbhar Bharat package. The additional financial assistance for the capital expenditure is in addition to the permission of Rs 14,694 crore issued to these states for extra borrowings for completing the reforms.

The scheme of ‘Special Assistance to States for Capital Expenditure’ is aimed at boosting capital expenditure by state governments which are facing difficult financial environment this year due to shortfall in tax revenue arising from the Covid-19 pandemic.

Capital expenditure has a higher multiplier effect, enhancing the future productive capacity of the economy and results in a higher rate of economic growth.

The scheme has got a good response from state governments. So far capital expenditure proposals of Rs 9,880 crore of 27 states have been approved by the Ministry of Finance.

An amount of Rs 4,940 crore has already been released to the states as the first installment. The capital expenditure projects have been approved in diverse sectors like health, rural development, water supply, irrigation, power, transport, education and urban development.

The scheme has three parts. Part one covers north-eastern and hill states under which Rs. 200 crore is allocated to each of the seven north-eastern states (Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim and Tripura) and Rs 450 crore is allocated to each of the hill states (Himachal Pradesh and Uttarakhand).

In view of the higher population and geographical area, Assam has been provided with an enhanced allocation of Rs 450 crore.

Part two is for all other states not included in part one. An amount of Rs 7,500 crore is earmarked and the amount has been allocated among 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 three of the scheme is aimed at pushing various citizen-centric reforms in states with an allocation of Rs 2,000 crore. This amount will be available only to those states which carry out by December 31, 2020 at least three out of the four reforms specified by the Ministry of Finance regarding reform-linked additional borrowing permissions.

The four reforms relate to One Nation One Ration Card, Ease of Doing Business, Urban Local Body/Utility and Power Sector.

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