Union govt offers states interest-free, 50-year loans worth Rs 12,000 crore

Finance Minister Nirmala Sitharaman further announced a Rs 10,000 interest-free festival advance for central government employees.
Nirmala Sitharaman, Anurag Thakur and others
Nirmala Sitharaman, Anurag Thakur and others
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The Union government on Monday announced that it will provide interest-free loan to state governments, worth Rs 12,000 crore in total. Finance Minister Nirmala Sitharaman made the announcement in a press conference on Monday, and said that the loan period would be 50 years. The loan will be given to states for capital projects. Out of the Rs 12,000 crore, Rs 1,600 crore will be given to north-eastern states and Rs 900 crore will be for Uttarakhand and Himachal Pradesh, she said.

The remaining Rs 7,500 crore will be for the rest of the states, of which Rs 2,000 crore will be given to states that have fulfilled three out of four norms announced as part of the Atmanirbhar fiscal deficit package.

The loan, the Finance Minister said, will have to be spent entirely on new or ongoing capital projects, adding that states can settle bills of contractors and suppliers but all the amount has to be paid before March 31, 2021.

The loan is over and above borrowing ceilings of the states and the repayment will be one bullet payment after 50 years, she said.

The Finance Minister also announced an additional capital expenditure of Rs 25,000 crore by the Union government. This will be in addition to Rs 4.13 lakh crore budgeted, she said, adding that the additional money will be for spending on roads, defence infrastructure, water supply and urban development.

For central government employees

The minister also announced cash vouchers for central government employees in lieu of leave travel concession (LTC) fare; and an interest-free festival advance to officers. The measures announced on Monday, the Finance Minister estimated, will boost consumer spending and capital expenditure by Rs 73,000 crore, to be spent by March 31, 2021.

Central government employees eligible for leave travel concession can spend money on buying non-food GST-rated items, in lieu of LTC fare. Nirmala Sitharaman said the employees could buy items that attract 12% or more goods and services tax (GST) and cost three times the fare and one-time leave encashment. These purchases will have to be made in digital mode from GST-registered outlets and GST invoice will have to be produced.

Every four years, central government employees get LTC to any destination of their choice plus one to their hometown, where the fare via air or rail travel was reimbursed and leave encashment of 10 days. Since travel is difficult to undertake during the pandemic, the government will pay the entitled fare as cash vouchers which have to be spent by March 31, 2021.

The Union government payout on cash-in-lieu-for-LTC will be Rs 5,675 crore, and another Rs 1,900 crore will be payout by central PSUs and public sector banks, the FM said. The demand infusion because of this would be Rs 19,000 crore, and another Rs 9,000 crore if half of the states follow this guideline, she added.

The government also announced a one-time Rs 10,000 interest-free festival advance to all its officers and employees as part of plans to increase consumer spending to spur demand in the economy. Finance Minister Nirmala Sitharaman said festival advance was discontinued from 6th Pay Commission for central government employees, but was being done as a one-time measure. This would be interest-free and can be repaid in 10 installments, and is available to all central government officers and employees.

This Rs 10,000 advance will come as a prepaid RuPay card, which can be spent by March 31, 2021. She added that Rs 4,000 crore is likely to be spent on this.

With PTI inputs

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