Facing the prospect of missing its target for capex loans to states due to delays in launching the programme, the Centre has fast-tracked disbursements under the Rs 1.5 lakh crore, 50-year interest-free capex loan scheme to stimulate economic activity and job creation.
A senior official told FE that, so far in FY25, the Centre has sanctioned Rs 85,000 crore in loans for various projects, of which Rs 60,000 crore have been released. This marks an increase of Rs 20,000 crore from the Rs 40,000 crore disbursed by October this year.
While the untied/unconditional component accounted for two-thirds of the budget outlay last fiscal year, the tied/conditional component accounted for almost two-thirds of the total outlay of Rs 1.5 lakh crore in the current fiscal year.
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In addition to conditionalities aimed at the better outcome of states’ spending, general elections and delayed general budget (in July), further affected the full rollout of the programme as conditionalities were specified in August only.
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Of the Rs 1.5 trillion in grant-like loans allocated for FY25, Rs 95,000 crore, or two-thirds, is linked to reforms and other criteria set by the Centre for states, including capex, efforts to stimulate industrial growth, assistance for completing major infrastructure projects, and urban and rural land reforms. The remaining Rs 55,000 crore is untied funding for projects identified by the states.
The Centre has allocated Rs 25,000 crore of ‘tied’ funds 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.
However, capital expenditures by states likely fell by nearly 9% year over year in the first six months of the current financial year even as their revenue spending rose at a faster pace during the period.
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A review of the finances of 17 states by FE,
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