NEW DELHI: The Centre has relaxed a clutch of norms regarding the release of interest-free capex loans to the state governments to ensure that the entire sum of Rs 1.5 lakh crore earmarked for 2024-25 is fully utilised during the year, and help arrest a decline in public capex.
The move is aimed at minimising a likely shortfall in actual budgetary capital expenditure from the budgeted level of Rs 11.1 lakh crore. By November end, Rs 5.13 lakh crore of the capex budget for the year was spent, which was down 12.3% on year.
“We will achieve 100% of the target set for the capex loans to states in the current financial year,” a senior official said.
Around Rs 90,000 crore or two-thirds of the annual outlay loans has already been released. Despite an early start in the previous fiscal, the Centre could release only Rs 61,500 crore in April-December of FY24. The acceleration this time around assumes importance as the roll-out was staggered and delayed this fiscal due to general elections and the full budget in July.
Of the grant-like loans earmarked for FY25, Rs 95,000 crore is linked to reforms and other criteria specified by the Centre for States including capex, efforts to stimulate industrial growth, assistance for completion of major infra projects, urban and rural land reforms, etc. The balance of Rs 55,000 crore is untied advances to states for projects identified by the states.
According to the latest amendment to the norms, the states which have faced natural disasters of severe nature in 2024-25, as confirmed by the home ministry panel will be provided with additional allocation of up to 50% of the amount already allocated under the untied category. This amount would have to be used by the affected states for reconstruction of infrastructure preferably in disaster-affected districts and for projects to mitigate future disasters.
Also, the states who have utilised the first instalment under the untied category and have availed the second instalment would be provided an additional allocation of up to 100% of the original allocation to North East and Hill States and 50% for the original allocation for other states, on a first-come-first-serve basis.
These two amendments would increase the aggregate flow of untied loans to states substantially as against the initial allocation of Rs 55,000 crore for FY25.
The Centre has also eased several conditions under the ‘tied’ component of the loan including the one related to ‘own capex’ achievement by the states. As per the original criteria, the Centre allocated Rs 25,000 crore as an incentive for states’ capex performance: 50% for achieving over 10% on-year capex growth in FY24 and the balance 50% for achieving over 10% growth in the first six months of FY25. Funds would be allocated among states in proportion to their share of central taxes and duties as per the award of the 15th Finance Commission.
The amendment to the condition says that in addition to states who qualify for incentives for achieving more than 10% growth in capital expenditure in the first half of 2024-25, states who achieve growth rate of more than 10% in Q2 plus Q3 (July to December 2024) of 2024-25 or in the first three quarters of 2024-25 over the growth rate in the corresponding period of 2023-24, will also be considered for grant of incentives.
Among others, the Centre also amended conditions related to urban and rural infrastructure projects and incentives for implementation of the SNA SPARSH Model for Just-in-Time release of funds under centrally sponsored schemes. These would ensure that loans earmarked for these purposes would be fully utilised by states.
A new part has been introduced under tied loans that earmarks Rs 5,000 crore loans to states which have undertaken or undertaking urban planning reforms in FY25.
The release of funds is very fast this year under the scheme, especially in the last two to three months, a pleasantly surprised senior official of one of the state governments said. Last fiscal, the Centre could release Rs 1,05,551 crore or 70% of the outlay of Rs 1.5 lakh crore as many states could not meet the conditionalities strictly enforced by the Centre.
The Centre’s capex declined by over 12% in April-November of the current financial year. Analysts estimated that the Centre’s capex could fall short of the FY25 target of Rs 11.11 lakh crore by Rs 1-1.5 lakh crore.
Source: The Financial Express
Greece’s Syriza Party, Once The Hope Of European Left, Is In Tatters 