NEW DELHI: The Centre has released loans of Rs 1.15 lakh crore to states so far this financial year under the scheme for interest-free 50-year special assistance for capital expenditure, inching closer to the revised estimate of Rs 1.25 lakh crore for the year. The amount released so far is 92% of the annual target.
In the revised estimate for 2024-25, the Centre has cut the outlay for the year to Rs 1.25 lakh crore from the Budget estimate of Rs 1.50 lakh crore as some states may not get the full amount for not meeting certain conditions.
“Another Rs 4,000-5,000 crore will likely be released by the end of February. The revised target will be fully met by March,” a senior official said.
Of the initial outlay of Rs 1.5 lakh crore, Rs 95,000 crore was 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, and urban and rural land reforms. The balance of Rs 55,000 crore was untied advances for projects identified by the states.
To accelerate disbursements given the delayed start to implementation of the scheme on account of the general elections, the Centre tweaked the norms in December. Accordingly, the states which faced natural disasters of severe nature in 2024-25, as confirmed by a 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-eastern and hilly states and 50% of 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 tweaked 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% year-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 conditions says that in addition to states which qualify for incentives for achieving more than 10% growth in capital expenditure in the first half of 2024-25, states which achieve a 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.
Source: The Financial Express
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