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Capex loans: Rs 70k cr sanctioned for states so far

Out of the Rs 1-trillion grant-like special capex facility, at least Rs 90,000 crore or 90% would be utilised by March even if a couple of states fail to avail the facility for not meeting basic conditions.

Capex loans: Rs 70k cr sanctioned for states so far
Non-compliance might also lead to re-allocation of their quotas of the capex loan to other states, sources said. (IE)

The Centre has sanctioned about Rs 70,000 crore or 70% of the 50-year interest-free capex loans of Rs 1 trillion being offered to the state governments in the current fiscal, official sources told FE. Of this, the Centre has disbursed about Rs 35,000 crore so far.

Out of the Rs 1-trillion grant-like special capex facility, at least Rs 90,000 crore or 90% would be utilised by March even if a couple of states fail to avail the facility for not meeting basic conditions.

Following the finance ministry’s deadline to states asking them to comply with the “no-rebranding rule” regarding the centrally-sponsored schemes by November 30 to avail themselves of the funds, Telangana and Rajasthan have fallen in line.

Now, all states except West Bengal and Odisha have fully complied with the basic condition of availing the grant-like funds from the Centre. Odisha has written to the Centre that it has complied, but no proof it has been submitted, according to central government officials. “It is a delicate situation. So, it’s too early to say if the entire Rs 1 trillion could be availed by states or not,” a senior official said.

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Non-compliance might also lead to re-allocation of their quotas of the capex loan to other states, sources said.

The Centre launched the Rs 1 -trillion scheme for FY23 to help states maintain their capital expenditure momentum, even after the end of the goods and services tax (GST) compensation. Most of the approvals and disbursements are for ongoing projects and clearing pending capex bills, but some new projects are also covered.

The beneficiary states so far include Maharashtra, Tamil Nadu, Uttar Pradesh, Bihar, Chhattisgarh, Karnataka, Haryana, Madhya Pradesh, Jharkhand, Goa, Himachal Pradesh, Meghalaya, Assam, Manipur, Nagaland, Sikkim, Arunachal Pradesh and Tripura.

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States lose out if they don’t meet the Centre’s norm that they can’t change the original name of centrally-sponsored schemes, a key condition for availing funds.

Of the Rs 1-trillion capex facility, Rs 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 the 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.

States have slowed down their capex in the first six months of the current fiscal to accommodate higher revenue spending even as they continue to curb borrowings. The combined capex of nineteen states whose finances were reviewed by FE was up just 2% on year at Rs 1.67 trillion in April-September of the current fiscal. These states had budgeted a capex of Rs 6.58 trillion for FY23, a rise of 40% over the FY22 level.

The Centre will likely meet the budgeted capex target of Rs 7.5 trillion, including Rs 1-trillion support to states for FY23, up 27% from the actual spending of Rs 5.93 trillion in FY22.

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First published on: 14-12-2022 at 03:40:00 am