The Centre will likely sanction almost the entire Rs 1 trillion untied capital expenditure loan for state governments and release nearly half of that by July-end. Accordingly, it has relaxed the norms to release two-third of the 50-year interest-free loans amounting to Rs 66,600 crore in the first instalment instead of the earlier plan to release one-third or Rs 33,300 crore.
The bulk of the funds in the first instalment will reach states by month-end.
The faster loan sanction is aimed at helping states regain their capex tempo. Besides, a staggered approach may lead to underutilisation of the funds given a host of state elections due by 2023-end.
With possible sanction of Rs 18,000 crore to Uttar Pradesh and a few other states, the total approvals will reach close to Rs 1 trillion by July-end from about Rs 70,000 crore now, a senior official told FE. As the working season is shorter this year, the approval of all untied projects for funding would help states plan better and spend faster, the official added.
The total outlay for the interest-free loans to states is Rs 1.3 trillion, with a tied component of Rs 30,000 crore.
Last year, when this special capex outlay was scaled up by more than six times to Rs 1 trillion, the release of funds started as late as October, owing to the fiduciary conditions and time taken by states to comply with them. By October last year, the release of funds was at Rs 26,300 crore, and FY23 ended with Rs 81,200 crore released.
Excluding the capex loan from the Centre, states’ capex grew by just 6% in FY23 after a robust growth of nearly 30% on a low base in the previous year.
In contrast, funds released by July 10 in the current fiscal have exceeded Rs 30,000 crore and will cross Rs 50,000 crore by the end of the current month. Like last year, the funds are being released for new as well as ongoing projects in the untied category.
The second installment of the Rs 33,300 crore under the untied part will be disbursed on utilisation of 75% of the amount released in the first, and on meeting 45% of the total state budget target fixed for capex by each state in FY24 in April-September.
States which have already received sanction and are getting funds include Karnataka, Madhya Pradesh, Odisha, Rajasthan, Tamil Nadu, Telangana, West Bengal, Bihar, Chhattisgarh, Goa, Gujarat, Haryana and Himachal Pradesh.
Tied capex loans are linked to reforms or specific projects that will take some time, the official said, adding that the proposals submitted by some states in this regard are being reviewed.
Half of the tied capex support of Rs 30,000 crore for reforms and specific purposes has been earmarked for urban planning reforms for efficient use of land resources, adequate resources for urban infrastructure, transit-oriented development, and enhanced availability and affordability of urban land.
The remaining Rs 15,000 crore is meant for financing reforms in urban local bodies, setting up of Unity Malls in state capital cities, incentive to states for the scrapping of government vehicles/ ambulances and increasing housing facilities for police personnel.