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Rs. 15000 Crore Sanctioned to States

  • 10 Apr 2020
  • 4 min read

Why in News

Recently, the Central Government has sanctioned ₹15,000 crore to States under the India Covid-19 Emergency Response and Health System Preparedness Package.

Key Points

  • The package is a 100% centrally-funded scheme and the funds will be provided under a mission mode approach.
  • Amount of ₹7774 crore will be utilised for immediate Covid-19 Emergency Response and rest will be used for medium-term support (1-4 years).
    • The amount of ₹4113 crore has already been disbursed to all the States and Union Territories (UTs) dealing with the emergency response to the pandemic.
  • Objective:
    • Mounting emergency response through development of diagnostics and dedicated treatment facilities.
    • Strengthening pandemic research, community engagement, risk communication and implementation
    • Management, capacity building, monitoring and evaluation.
  • As per the evolving conditions, the government is authorised to re-appropriate resources among various components of the package and among various implementation agencies like the National Health Mission, Central Procurement, Railways, Department of Health Research/Indian Council for Medical Research (ICMR), National Centre for Disease Control.
  • The States can use the funds for:
    • Centralised procurement of essential medical equipment and drugs required for treatment of infected patients (Personal Protective Equipment, isolation beds, ICU beds, ventilators, etc.)
    • Strengthen and build health systems to support prevention and preparedness for future disease outbreaks.
    • Setting up of laboratories and bolstering surveillance activities, biosecurity preparedness, pandemic research and proactively engage communities.
    • Conducting risk communication activities.

Reasons for Strained State Finances

  • Fall in the revenues due to the lockdown and higher spending due to the coping measures against novel coronavirus pandemic.
    • There are no buyers for state bonds, and goods and services tax collections are down, revenues from fuel, liquor, stamp duty and registration charges are also down.
    • At the same time, the states are incurring bulk of the on-the-ground expenditures on containing Covid-19.
  • States are currently mandated to keep their fiscal deficits within 3% of Gross Domestic Product (GDP).
    • A one percentage point relaxation will give them latitude to borrow an extra ₹200,000 crore or so, but this will not really work in a “broken” bond market as investors demand higher interest rates.
  • Simply put, the borrowing costs for states have gone up by almost one percentage point in less than a month’s time.
  • Few states wanted to borrow around ₹37,500 crore through sale of bonds, with tenures ranging from two to 15 years, conducted on the Reserve Bank of India’s (RBI) auction platform.
    • However, they were able to mobilise only ₹32,560 crore.
  • Since 1st April, the central bank has increased the existing ways and means advances limits (for states to borrow at the repo rate) by 30%, apart from allowing them to be in overdraft for 21 continuous working days, from the earlier 14 days.

Source:TH

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