Scheme Special Assistance to States for Capital Investment
- 30 Sep 2022
- 5 min read
Why in News?
Recently, the Government has launched a Scheme Special Assistance to States for Capital Investment for 2022-23.
What is the Scheme Special Assistance to States for Capital Investment?
- Under this Scheme, financial assistance is provided to the States Governments in the form of 50-year interest free loan for capital investment projects.
- For the 2022-23 Financial Year (FY) a total financial assistance of Rs 1 lakh crore would be given to states.
- The loan under the scheme would be over and above the normal borrowing ceiling allowed to states for FY 2022-23 and should be spent in the same year.
- Eligible Parts of the Scheme:
- New or ongoing projects or for settling pending bills in ongoing capital projects.
- States may submit projects of higher value than the funds allocated, indicating their preference/priority.
- Different Parts of the Scheme:
- Exclusion: Projects with capital outlay of less than 5 crore (2 crore for North East) and repair and maintenance projects irrespective of capital outlay are not eligible
What is Capital Expenditure?
- Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc.
- It also includes the expenditure incurred on acquiring fixed assets like land and investment by the government that gives profits or dividends in future.
- Along with the creation of assets, repayment of loan is also capital expenditure, as it reduces liability.
- Capital spending is associated with investment or development spending, where expenditure has benefits extending years into the future.
- Capital expenditure is long-term in nature and allows the economy to generate revenue for many years by adding or improving production facilities and boosting operational efficiency.
- It also increases labour participation, takes stock of the economy and raises its capacity to produce more in future.
- Different from Revenue Expenditure:
- Unlike capital expenditure, which creates assets for the future, revenue expenditure is one that neither creates assets nor reduces any liability of the government.
- Salaries of employees, interest payment on past debt, subsidies, pension, etc, fall under the category of revenue expenditure. It is recurring in nature.