In order to spur states to focus on infrastructure spending and help them meet their capital expenditure (capex) targets for the current financial year, the government will release additional devolution funds due to them, totalling Rs 95,082 crores on November 22.
Briefing the media after a marathon meeting with chief ministers of 15 states and finance ministers of other states, finance minister Nirmala Sitharaman said that the decision to release the funds was taken after receiving requests from states for “front loading” of tax devolution funds, as it was an exceptional year.
She told reporters that several states were of the view that this would help them in spending more on infrastructure development as there will be no shortage of funds.
“Therefore I have directed the finance secretary to release an additional instalment of tax devolution on November 22 to the states. There will be two installments of Rs 47,541 crore each which will be released to all states on that day. Therefore the total amount will be Rs 95,082 crore,” the finance minister said.
As this has been an exceptional year when the pandemic hit the economy in the first quarter of the current financial year, this was a rare meeting held under rare circumstances, Ms Sitharaman said.
The finance minister added that there was a consensus among states that infrastructure spending was important and for that they need funds, therefore it was decided to release additional instalments of tax devolution.
As per the recommendations of the 15th Finance Commission, 41 percent of the divisible tax pool is to be devolved to states.
Finance Secretary T V Somanathan said that the funds are given to states in 14 instalments, 11 in eleven months and three in March, the last month of the fiscal year.
“This month we will give the states two instalments instead of one,” he said.
The finance minister said that states like Andhra Pradesh, Chhattisgarh and Uttarakhand are among some of the states which have already met their capex targets set for them by the Centre for the current fiscal.
When asked whether the issue of cryptocurrency was also discussed during the meeting, Ms Sitharaman said that none of the states spoke about it.
Earlier in the day, during the meeting of the Parliamentary standing committee on finance with representatives of cryptocurrency industry, it was felt that there is a need to regulate the virtual currency.