The Centre has approved about Rs 34,000 crore in interest-free 50-year capex loans to 13 states so far in the current fiscal, finance secretary TV Somanathan told FE.

The Union government launched an expanded scheme of Rs 1 trillion for FY23 to help states boost capital expenditure, since the end of the goods and services tax (GST) compensation could have resulted in states cutting down on their productive spending plans.

Of the total amount, 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 key infrastructure connectivity projects.

Even as the Central government is planning to put a leash on its own “wasteful” revenue spending to rein in fiscal deficit, the finance secretary asserted that there is no curb on capex by any ministry or department. “There is no restriction whatsoever by the finance ministry to slow down capex in the Central government ministries/departments even by a minute. Capex is going on at full speed, the tap is open and there is complete freedom to them to undertake capex,” Somanathan said.

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His statement came after the Central government reported a fiscal surplus of Rs 11,040 crore after a gap of over two years in July and a revenue surplus of Rs 42,509 crore, thanks to buoyancy in tax collections and reining in of revenue expenditure, even as capex continued robust momentum.

The Centre has budgeted a capex of Rs 7.50 trillion for FY23, up 27% from the actual spending of Rs 5.93 trillion in FY22, betting big on its high multiplier effect. Of course, about Rs 1 trillion of the current fiscal’s target will be spent by states, as they have been provided loan support to boost their asset creation.

The Centre, which has put a thrust on capex to boost economic growth, continued the momentum by almost doubling the spending on year in July to Rs 33,606 crore, while it invested 62% more on year in April-July at Rs 2.09 trillion.

At a briefing on Wednesday, Somanathan had made it clear that the thrust on budgetary capex by the Centre will continue.

As for the long-term loans to states for boosting capex, the beneficiaries so far include Uttar Pradesh, Karnataka, Maharashtra, Bihar, Chhattisgarh, Goa, Manipur, Nagaland, Sikkim and Himachal Pradesh. Apart from financing new projects, the approvals for funds were also for completing the ongoing projects and settling pending capex bills.

The conditional capex loans (Rs 20,000 crore) 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 key states whose finances were reviewed by FE was down 9% on-year to Rs 55,057 crore in the June quarter.

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.