Madhya Pradesh and Andhra Pradesh have successfully completed three of the four citizen centric reforms despitr the coronavirus pandemic and stand to gain additional borrowing rights for capital expenditure stipulated, said the Ministry of Finance on Wednesday.
The four citizen centric reforms include the One Nation - One Ration Card Reforms, Ease of Doing Business Reforms, Urban Local Body/Utility Reform and Power Sector Reform. Barring the power sector reforms, these two states were able to complete the first three reforms, becoming the first group of states to be awarded with extra borrowing rights for capital expenditure.
Under the "Special Assistance to States for Capital Expenditure", these two states will get funding to the tune of Rs 1,004 crore. Andhra Pradesh will get Rs 344 crore while Madhya Pradesh has become entitled to receive Rs 660 crore for capital projects under the scheme. The Capex Scheme was ushered in to enable the State Governments facing financial constraints this year due to the shortfall in tax revenue due to the Covid-19 pandemic.
Announced by Finance Minister Nirmala Sitharaman on October 12, 2020 as part of Aatma Nirbhar Bharat package, the schme sought to provide additional financial assistance for the capital expenditure, in addition to the permission of Rs 14,694 crore issued to these states for extra borrowings for completing the reforms. The table shows the allocation of funds:
Capital Expenditure has a higher multiplier effect, enhancing the future productive capacity of the economy, and results in a higher rate of its growth. Therefore, despite the adverse financial position of the Central government, it was decided to extend the special assistance of capital expenditure to the state governments in financial year 2020-21, said the ministry in a statement.
The scheme has got good response from the State Governments and so far, capex proposals of Rs 9,880 crore from 27 states have been approved by the Ministry and an amount of Rs 4,940 crore has already been released to the States as the first instalment. However, Tamil Nadu has not availed the benefit under the Scheme, said the ministry without providing further details.
The capital expenditure projects in diverse sectors of economy like, Health, Rural Development, Water Supply, Irrigation, Power, Transport, Education, and Urban Development have been approved so far under the scheme.
Three Parts of Capex Scheme
The Scheme has three parts. Part-I of the scheme covers the north-eastern and hill states and Rs 200 crore has been allocated to each of the 7 north-eastern States (Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim and Tripura) and Rs 450 crore is allocated to each of the hill states of Himachal Pradesh and Uttarakhand.
Under Part-II of the Scheme, other States not included in Part-I, will be included with a budget of Rs 7,500 crore, to be 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-III of the Scheme is aimed at pushing various citizen-centric reforms in the states, with an amount of Rs 2,000 crore earmarked for those states who carry out at least 3 out of the 4 reforms by December 31, 2020. Hence, Andhra Pradesh and Madhya Pradesh stand to gain for the pace of projects undertaken under these reforms.
