The Centre has accelerated disbursement of the 50-year interest-free capex loans to the state governments by releasing about Rs 30,000 crore or 50% of the amount sanctioned so far in the current fiscal year, official sources told FE.
The finance ministry will soon send a “final letter” to four states — West Bengal, Rajasthan and Odisha – asking them to comply with the “no-rebranding rule” regarding the centrally sponsored schemes by November to avail themselves of the funds. Non-compliance will lead to re-allocation of their quotas of the capex loan to other states, the sources said.
The Centre launched a 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.
“So far, Rs 60,200 crore has been sanctioned to about 22 states, of which about Rs 30,000 crore has been disbursed,” a finance ministry official told FE. The sanctions will further increase in the coming weeks after two more states submit additional information sought from them, he added. The disbursement was only around Rs 2,000-3,000 crore a month ago.
Most of the approvals and disbursements are for ongoing projects and clearing pending capex bills, but some new projects are also covered.
Also Read: Centre sanctions half of Rs 1 trillion capex loan to 18 states till September
The beneficiary states so far include Uttar Pradesh, Tamil Nadu, Bihar, Chhattisgarh, Karnataka, Maharashtra, Haryana, Madhya Pradesh, Jharkhand, Goa, Himachal Pradesh, Meghalaya, Assam, Manipur, Nagaland, Sikkim, Arunachal Pradesh and Tripura.
However, four states may 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.
The branding violations by West Bengal and Telangana pertain to Pradhan Mantri Jan Arogya Yojana (PM-JAY) while Rajasthan and Odisha have violated branding norms on Pradhan Mantri Awas Yojana, official sources said.
The Centre’s view is that even though it spends annually over `4 trillion under the centrally sponsored schemes, many states, especially those ruled by non-BJP parties, have changed many schemes’ names to deny credit to it. The capex support give it a handle to fix this issue.
Of Rs 1 trillion capex facility, 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 balance20,000 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.
The combined capex of 19 states whose finances were reviewed by FE, was up just 10% on year at Rs 1.33 trillion in April-August of FY23 compared with a 70% y-o-y increase in the corresponding period a year ago, albeit aided by a favourable base. These states have budgeted a capex of `6.58 trillion for FY23, an increase of 40% over the FY22 level.
As states draw down from the Centre’s special capex facility, their capex may start showing improvement from Q3FY23 onwards, analysts said
The Centre has budgeted a capex of Rs 7.5 trillion including, Rs 1 trillion support to states for FY23, up 27% from the actual spending of `5.93 trillion in FY22.