The Centre has released nearly Rs 1.5 lakh crore in interest-free 50-year capex loans to states for 2024-25, overachieving the revised estimate and meeting the initial budget estimate for the year, official sources told FE.
Of the Rs 1,49,484 crore capex loans released to the states, half of that was for reforms or project-linked as outlined in the scheme for special capital assistance for states for FY25, a senior official said.
In the revised estimate for 2024-25 presented in the Budget on February 1, the Centre had cut the outlay for the year to Rs 1.25 lakh crore from the budget estimate of Rs 1.5 lakh crore as some states were lagging in meeting conditionalities.
Of the initial outlay of Rs 1.5 lakh crore grant-like loans earmarked for FY25, Rs 95,000 crore or two-thirds, were linked to reforms and other criteria specified by the Centre for states, including capex, efforts to stimulate industrial growth, assistance for completion of major infra projects, urban and rural land reforms, etc. The balance of Rs 55,000 crore was untied advances to states for projects identified by the states.
To accelerate disbursements, given the delayed start to the implementation of the scheme on account of general elections, the Centre tweaked the norms in December. Accordingly, the states which have faced natural disasters of severe nature in 2024-25, as confirmed by the Home Ministry panel, were provided with an additional allocation of up to 50% of the amount already allocated under the untied category. This amount would have to be used by the affected states for reconstruction of infrastructure preferably in disaster-affected districts and for projects to mitigate future disasters.
Also, the states that have utilised the first instalment under the untied category and have availed the second instalment were provided an additional allocation of up to 100% of the original allocation to Northeast and Hill States and 50% for the original allocation for other states, on a first-come-first-serve basis.
These two amendments increase the aggregate flow of untied loans to states to nearly Rs 75,000 crore as against the initial allocation of Rs 55,000 crore for FY25.
The Centre has also tweaked several conditionalities under the ‘tied’ component of the loan, including the one related to ‘own capex’ achievement by the states. As per the original criteria, the Centre allocated Rs 25,000 crore as an incentive for states’ capex performance: 50% for achieving over 10% on-year capex growth in FY24 and the balance 50% for achieving over 10% growth in the first six months of FY25. Funds would be allocated among states in proportion to their share of central taxes and duties as per the award of the 15th Finance Commission.
The amendment to the condition said that in addition to states who qualify for incentives for achieving more than 10% growth in capital expenditure in the first half of 2024-25, states who achieved a growth rate of more than 10% in Q2 plus Q3 (July to December 2024) of 2024-25 or in the first three quarters of 2024-25 over the growth rate in the corresponding period of 2023-24, were also be considered for grant of incentives.