Sitharaman offers states ₹12,000 crore interest-free for the next 50 years if they can spend it on capital projects by March 2021

Sitharaman offers states ₹12,000 crore interest-free for the next 50 years if they can spend it on capital projects by March 2021
Indian Finance Minister Nirmala SitharamanBCCL
  • States in India are being offered ₹12,000 crore without interest for the next 50 years if they can spend on capital projects by 31 March 2021.
  • The total amount has been divided into three parts, including a slab for states that have met three out of the four reforms given in the Atma Nirbhar fiscal deficit package.
  • The centre’s budget provision for capital expenditure has also been allocated an extra ₹25,000 crore.
Finance Minister Nirmala Sitharaman is coming to the rescue of states with loans that will be interest free for the next 50 years, provided the entire amount is spent by March 2021.

In what is being called, ‘special assistance for states’, a total of ₹12,000 crore will be doled out. But the money has to specifically be used for new or ongoing capital projects. The funds can be used to settle contractors, suppliers’ bills and other pending payments on such projects.

These new loans will be over and above other additional borrowing ceilings that have been allocated to states.

“There will be bullet repayment after 50 years. No servicing is required until then, neither for the principle nor the interest,” said Sitharaman.

Division of ₹12,000 crore
Part 1: ₹2,500 crore ₹200 crore each to eight North East states and ₹450 crore each to Himachal Pradesh and Uttarakhand
Part 2: ₹7,500 crore For all other states.
Part 3: ₹2,000 crore For states which meet at least three of the four reforms given in Atma Nirbhar fiscal deficit package

Distribution of the second part of the ₹12,000 crore will be divided according to the share that they have as per the Finance Commission’s devolution.

Only 50% of the loan amount will be doled out initially. The rest will be disbursed after the first installment has been exhausted.

For the centre, an additional ₹25,000 has been allocated in the budget — over and on top of the estimated ₹4,13,000 crore that has already been provided — for capital expenditure specifically on roads, defence, infrastructure, water supply, urban development, defence infrastructure and domestically produced capital equipment.

“Allocations will be made in forthcoming Revised Estimate discussion of the Ministry of Finance with concerned ministries,” said Sitharaman.

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