The Centre’s capital expenditure loans to state governments in FY25 will have much greater reliance on reforms to be undertaken by them in assorted areas. Capex growth, steps to stimulate industrial growth, land reforms and creation of farmers’ registry are among the several conditions to be attached to release of these funds, with a total tied component of Rs 95,000 crore in the year.
According to the relevant guidelines seen by FE, the Centre has linked release of Rs 25,000 crore or more than a fourth of of the tied part of the interest-free loans to the states in the current fiscal to capex-related achievements. Half of the corresponding share of each state will be released to only those states that reported own capex growth of 10% or more in FY24 and the other half will be linked to similar annual capex growth in H1FY25.
The condition comes in the wake of an over 20% decline in states’ capex growth in Q1FY25. This means to be eligible for the loans linked to capex performance, states will have to fast-track spending.
Of the Rs 1.5 trillion grant-like capex loans allocated for FY25, the untied component of Rs 55,000 crore will be unconditional, and states can identify the projects to spend it on.
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 Centre has also earmarked Rs 15,000 crore on first-cum-first-serve basis for states initiating reforms in building regulations for commercial purposes to stimulate industrial growth and livelihood-friendly cities. Accordingly, states have been mandated to undertake reforms including amending building regulations to minimise ground floor loss for standalone factories and encourage flatted factories’ development. Also, states have to encourage vertical growth of commercial buildings and allowing construction of hostels in industrial zones.
Another Rs 15,000 crore has been allocated to finance the state’s share for the completion of major urban and rural infrastructure projects like railways projects, metro rail projects, highway projects power projects as well as the state’s share of projects under centrally sponsored schemes like Jal Jeevan Mission, Atal Mission for Rejuvenation and Urban Transformation and Pradhanmantri Gram Sadak Yojana.
Among others, Rs 5,000 crore each has been allocated to incentivise reforms in urban land reforms and rural land reforms, as well as for setting up of state farmers’ registry and working women’s hostels in states.
For rural land reforms, states have to achieve several milestones to receive incentives including sub-division of all land parcels as per current ownership, assignment of unique land parcel identification number (Bhu-Aadhar) and geo-referencing of all land parcels, making land registry process completely online and inter-link with other systems and saturation of land records and modernisation of revenue court case management systems.
For urban land reforms, incentives will be provided for the digitisation of land records, using GIS mapping, and the establishment of an IT based system for property record administration, updating, and tax administration.
The Centre will also provide Rs 4,000 crore to states for joining the single nodal agency model for just-in time release of funds for centrally sponsored schemes for better outcomes, Rs 3,000 crore for scrapping old vehicles, Rs 2,000 crore for setting up iconic tourist centres and Rs 1,000 crore for development of the National Capital Region.