Page 452 - ES 2020-21_Volume-1-2 [28-01-21]

Fiscal Developments 79

compensation. The special window of ` 1.1 lakh crore has been operationalised since 23rd
October, 2020 and the Government of India has already borrowed an amount of ` 54,000
crore on behalf of the States in five instalments and passed it on to the States and UTs.
• Under the terms of Option 1, the states are also entitled to get unconditional permission to
borrow the final instalment of 0.5 per cent of GSDP out of the 2% additional borrowing
permitted for FY 2020-21. This amounts to an additional mobilization of ` 1.07 lakh crore,
over and above the ` 1.1 lakh crore special window to meet the revenue shortfall arising out
of GST implementation.

• In addition to this, the States on selecting Option 1, will also be able to carry forward unutilised
extra borrowing ceilings allowed for FY 2020-21 to the next financial year, whereby the first
and the final instalments of 0.5 per cent each can be carried forward unconditionally; and the
reform-linked portions can be carried forward if the States meet the reform criteria within the
dates already prescribed for this year.
• With a view to protecting the states from the higher borrowing costs, Centre will endeavour
to keep the cost at or close to the G-sec yield for the special borrowing window, and in the
event of the cost being higher, it will bear the margin between G-secs and average of State
Development Loan yields, of up to 50 bps, through a subsidy. The interest on the borrowing
under the Special Window will be paid from the Compensation Cess as and when it arises
until the end of the transition period. After the transition period, principal and interest will
also be paid from proceeds of the Cess, by extending the Cess beyond the transition period
for such period as may be required. The State will not be required to service the debt or to
repay it from any other source.

3. Scheme for Special Assistance to States for Capital Expenditure
• During the year 2020-21, considering the fiscal environment faced by the State Governments
due to the shortfall in tax revenues arising from the COVID-19 pandemic, 'Scheme for Special
Assistance to States for Capital Expenditure', has been approved wherein special assistance
is being provided to the State Governments in the form of 50-year interest free loan up to
an overall sum not exceeding ` 12,000 crore.

• The Scheme comprises of ` 1600 crore loan for the eight North East states (200 crore each),
` 900 crore loan for the states of Uttarakhand and Himachal Pradesh (` 450 crore each),
` 7,500 crore for remaining states (as per 15th Finance Commission devolution), and ` 2,000
crore for those states which fulfil at least 3 out of 4 reforms mentioned under enhanced
borrowing provision in Aatma Nirbhar Bharat Package.
The loan amount can be used for new or ongoing capital projects needing funds and/ or
settling contractors’/ suppliers’ bills on such projects.

• As on 12 December 2020, capital expenditure projects worth ` 9,879.61 crore for 27 states
were approved and an amount of ` 4,939.81 crore had been released as first instalment under
the scheme.

4. SDRF
• The Central Government by way of a special one-time dispensation had decided to treat
COVID-19 as a notified disaster for the purpose of providing assistance under SDRF. To