The Centre has sanctioned Rs 51,085 crore of the Rs 1 trillion interest-free 50-year capex loans earmarked for FY23, to 18 states till September in the current financial year.
The beneficiary states so far are Bihar, Chhattisgarh, Karnataka, Maharashtra, Uttar Pradesh, Tamil Nadu, Haryana, Madhya Pradesh, Jharkhand, Goa, Himachal Pradesh Meghalaya, Assam, Manipur, Nagaland, Sikkim, Arunachal Pradesh and Tripura.
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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, 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.
Most of the disbursement of the capex loans is expected to materialise in H2FY23. 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 nineteen 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, albiet aided by a favourable base. These states have budgeted a capex of Rs 6.58 trillion for FY23, an increase of 40% over FY22 level.
As states draw down from the Centre’s special capex facility, their capex may start showing improvement from Q3FY23 onwards, analysts said. State capex is seen to have a higher growth multiplier potential than central Budget/CPSE capex. While the Centre’s capex growth year-on-year remained high at 47% as against a required rate of 27%, capital spending has averaged around Rs 50,000 crore per month in the first five months, lower than the required monthly average of Rs 62,500 crore to meet the FY23 BE of Rs 7.5 trillion. The monthly capex by the Centre will also improve once the capex disbursement from the Rs 1 lakh crore facility picks up from October onward.