Central financial assistance
Also called: CFA · Topic: Government Budget, Fiscal Policy and FRBM · NCERT: Beyond NCERT
Meaning
Central financial assistance (CFA) is money the Union government gives to meet part of the cost of a scheme or project. It can go to a state government, an agency or directly to a beneficiary. It is a grant or subsidy, so it does not have to be paid back. In the budget, CFA paid as a grant counts as revenue expenditure (spending that creates no asset owned by the Centre), even when it pays for things like solar panels. Grants of this kind are therefore included in effective capital expenditure (capex plus grants that create assets). CFA decides how attractive a scheme is. If a part of a scheme has no CFA, the beneficiary must pay the whole cost, and take-up usually stays low.
Example
PM Surya Ghar: Muft Bijli Yojana was launched in February 2024 with a total outlay of ₹75,021 crore. Under it, a household gets a CFA of ₹30,000 for a 1 kW rooftop solar system, ₹60,000 for 2 kW, and ₹78,000 (the maximum) for 3 kW or more. The money is credited straight into the household's bank account.
Don't confuse with
- Loans and advances from the Centre: these must be repaid and count as capital expenditure. CFA is a grant that is never repaid.
- Centrally sponsored scheme: this is a type of scheme in which the Centre and the states share the cost. CFA is the money the Centre puts in, and it can be paid under many kinds of schemes.