The Centre has sanctioned Rs 31,524 crore, or 39% of the unconditional component of the interest-free 50-year capex loans, to 10 states till July in the current financial year.
The beneficiary states so far are Uttar Pradesh, Karnataka, Maharashtra, Bihar, Chattisgarh, Goa, Manipur, Nagaland, Sikkim and Himachal Pradesh. Most of the approvals were for ongoing projects and clearing pending capex bills, as well as some new projects.
The Centre launched an expanded scheme of Rs 1 trillion for FY23 to help states maintain capex, considering a request from states, since the end of the goods and services tax (GST) compensation could have resulted in states junking capex projects in the absence of funds.
Of this, `80,000 crore would be released proportionately to the states’ share in the devolution of central taxes and for projects solely based on their viability. The release of the balance Rs 20,000 crore is linked to infrastructure connectivity projects such as laying of optical fibre cables for last-mile connectivity under BharatNet in rural areas, the state component of the PM Gram Sadak Yojana, projects under the GatiShakti master plan and urban sector reforms.
The conditional capex loans are expected to be utilised in H2FY23 after the assessment of the states’ proposals by administrative ministries. The central government is keen that the entire loan funds are invested in asset-creating projects within the current financial year, giving a fillip to capital formation.
The combined capex of 20 states whose finances were reviewed by FE was down 9% on-year to Rs 55,057 crore in the June quarter. These states, which represent roughly 80% of the country’s gross domestic product (GDP), had reported a whopping 118% capex growth in Q1FY22, partly aided by a favourable base.
Given the challenging fiscal environment faced by the states due to the Covid-19 pandemic, the Centre had launched a scheme for special capital expenditure support to states in FY21 by disbursing Rs 11,830 crore in 50-year interest-free loans and another Rs 14,186 crore in FY22.