The Ministry of Finance has finalised the guidelines and funds under the Scheme for Special Assistance to States for Capital Investment 2024-25 and circulated them to the states.
Special Assistance to States Finalized
- Rs 10,000 crore has been finalised for implementing land-related reforms in rural and urban areas.
- Additional Funds:
- Farmers’ Registry: Rs 5,000 crore has been finalised for creating a Farmers Registry with details of six crore farmers and their lands during the financial year 2024-25 (FY25)
- Working Women’s Hostel: Rs. 5,000 crore has been finalised for the construction of working women’s hostels.
- The State Government will provide land for the hostels either free of cost, or the cost of acquiring the land will be borne by them
- Aim: To facilitate higher participation of women in the workforce through the establishment of working women’s hostels in collaboration with industry, and setting up crèches.
- Public-Private Partnership (PPP) model: The operation and maintenance of the hostels will be managed by a private party while the ownership of the hostel would rest with the state government
- State Wise Allotment: Uttar Pradesh will receive the highest amount of Rs 382 crore, followed by Madhya Pradesh (Rs 284 crore) and Assam (Rs 226 crore).
- Rs 1,000 crore for the development of the National Capital Region (NCR): It will be divided equally among the three states of Haryana, Uttar Pradesh, and Rajasthan.
- Rs 15,000 crore for states’ shares of Centrally Sponsored Schemes, including Urban and Rural Infrastructure Projects
- Rs 15,000 crore for stimulating industrial growth
- Rs 4,000 crore in incentives for Implementing the SNA Sparsh model for just-in-time release of funds under Centrally Sponsored Schemes
- Rs 25,000 crore as incentives for achieving targets fixed for capital expenditure for 2024-25.
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About The Scheme for Special Assistance to States for Capital Investment 2024-25
- The scheme envisages special assistance being provided to the States in the form of a 50-year interest-free loan.
- For the Fiscal Year 2023-24: The Budget Estimate for the scheme was ₹1.30 lakh crore which was later revised to ₹1.05 crore. The scheme was launched for the first time in fiscal year 2020-21 in the wake of COVID-19 Pandemic
- Principle: The scheme is based on the principle of Multiplier Effect, where it is believed that every ₹1 spent as capital expenditure will result in an impact worth ₹3.
- Capital investment Sectors: Projects in Health, education, irrigation, water supply, power, roads, bridges and railways are approved.
- Fiscal Year 2024-25:
- Budget: ₹1.30 lakh crore has been allotted for the year 2024-25
- Mandatory Conditions:
- Correct translation to local language about names and features of centrally sponsored schemes
- Implementing the SNA Sparsh model: Deposit of central share of interest earned in SNA accounts till March 31 in the Consolidated Fund of India.
- Proposed Land Reforms in Rural Areas: States have to include the,
Scheme Part
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Objective
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Part I |
States have been allocated in proportion to their share of central taxes & duties as per the award of the 15th Finance Commission.
- ₹55,000 has been earmarked under this componet
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Part-II |
Incentivizing scrapping of government vehicles by providing incentives to States.
- ₹5,000 crore is allotted.
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Part-III |
Encouraging reforms in urban planning.
- ₹5,000 crore has been provided for the ‘Development of iconic Tourist Centres’.
|
Part-IV |
Promoting reforms in urban finance. |
Part-V |
Increasing housing stock for police personnel in urban areas. |
Part-VI |
Promoting national integration and the “Make in India” concept through the construction of Unity Malls in each State. |
Part-VII |
Providing financial assistance for the establishment of libraries with digital infrastructure at the Panchayat and Ward levels. |
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- Assignment of a Unique Land Parcel Identification Number (ULPIN) or Bhu-Aadhaar for all lands
- Digitisation of Cadastral Maps
- Survey of map sub-divisions according to current ownership
- Establishment of a land registry
- Proposed Land Reforms In Urban Areas:
- Fiscal incentives will be provided for the digitization of land records using GIS mapping
- Establishment of an information technology-based system for property record administration, updating, and tax administration.
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Capital Expenditure In India
- Capital Expenditure is defined as the governmental (central, state, local) spending on the development of physical assets like buildings, machinery, equipment, healthcare facilities, educational institutions, etc.
- It also covers the costs incurred by the government to purchase fixed assets like land and investments that will yield earnings or dividends in the future.
- Capex involves funds spent on the following:
- Purchasing fixed and intangible assets
- Upgrade an existing asset
- Repairing an existing asset
- Repayment of loans
- Capex Loans to States: They are distributed to the states in two major categories,
- Untied: The untied loans would be released to states in two installments under the Scheme for Special Assistance to States for Capital Investment 2024-25
- The first instalment of 66% of the approved amount on meeting the mandatory conditions and the second instalment of 34% will be released on utilization of at least 75% of the amount released in the first installment.
- Tied: It is subject to social reforms and specific development expenditures.
- Example: The Funds provided under specific Centrally Sponsored Schemes and other Schemes.
- Fiscal Year 2023-24: The Centre had spent 85 per cent of the revised capital expenditure estimate of Rs 9.5 lakh crore.
- States: As per the provisional accounts of 25 states, They achieved 84 per cent of the budgeted capital expenditure
These states had budgeted a capital expenditure (capex) programme of Rs 8.37 trillion for FY24. The provisional amount spent was Rs 7.02 trillion.
- Lowest capex absorption States: These included Nagaland, Chhattisgarh, Punjab, and Mizoram.
- Exception: Four states including Uttar Pradesh, Telangana, Bihar, and Sikkim spent more than the targeted amount
- Fiscal Year 2024-25: Centre’s Capital Expenditure Target were raised by 16.9 per cent for financial year 2024-25 (FY25) to Rs 11.1 trillion over the revised estimates for FY24 In the interim budget.
Factors Influencing India’s States’ Capex Spending
- Public Sector Led: The public sector leads in Capex Expenditure with national and state government spending in double digits and in a wide range of areas
- Underperforming Private sector: Private Investments has increased slowly, in single digits, and that too in concentrated areas like in infrastructure, hospitality and retail, and is yet to surge into other segments.
- Elections: Indian states spend the most on capex when their is an election approaching
- Example: Telangana has met 90 percent of its FY24 capex target. The state held elections to its legislative assembly in November last year
Need For Capital Expenditure
- Planning and Development: it shows the expenditure is planning and development-linked expenditure which may have a positive effect on labor engagement, build up or upgrade infrastructure, and improve the ability to generate more revenue through asset creation.
- Investment Environment: States with healthy capex report cards often host a positive investment environment for the private sector.
- Long Term growth: Capex creates Multiplier Effect thus has a greater impact on long-term growth and productivity than revenue expenditure
- Increase Productivity: Allocating capital for new projects, expanding ventures, or improving technology and infrastructure promotes economic growth by increasing productivity, demand for related industries, and creating job opportunities.
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