In the Budget presented on February 1, the Centre cut the outlay for the capex facility by 19% from the budget estimate of Rs 1.3 trillion for FY24 as some states failed to meet conditionalities. For next year, the Centre has made an outlay of Rs 1.3 trillion.
The Centre’s liberal capital expenditure loans stood at Rs 1.09 trillion or 104% of the FY24 revised estimate thanks to last last-minute rush by some states to benefit from the scheme.
In the Budget presented on February 1, the Centre cut the outlay for the capex facility by 19% from the budget estimate of Rs 1.3 trillion for FY24 as some states failed to meet conditionalities. For next year, the Centre has made an outlay of Rs 1.3 trillion.
However, the total disbursements of fifty-year interest-free capex loans will likely touch Rs 1.10 trillion by March 31 as against the revised estimate of Rs 1.05 trillion, a senior official told FE, reflecting demand and quick absorption by states.
Andhra Pradesh, Kerala and Punjab did not receive any funds from the liberal loan facility this year as these states did not fulfil the conditionalities or failed to fully spend the amounts allocated to them in the previous fiscal under the scheme.
According to the norms for the scheme, the first instalment of 66.6% was to be released to each state government on meeting three fiduciary conditions: adhering to branding norms for central schemes, sharing of scheme-wise spending data, and proof of deposit of the Centre’s share of the interest earned in Single Nodal Agency (SNA) account for each scheme.
The second instalment of untied funds was to be released on utilisation of 75% of the amount released in the first instalment and on meeting 45% of the total target fixed for capex by each state in FY24.
Besides frontloading of tax devolutions, interest-free loans from the Centre helped the states increase their capex by 40% on year in the first nine months of the current financial year compared with a 7% rise in the year-ago period.
Real GDP growth in Q3FY24 was a surprising 8.4% on year, which was largely driven by higher gross fixed capital formation at 10.6% on year due to the Centre, states and CPSEs’ thrust on capex.
To strengthen the hands of the states, the scheme for providing financial assistance to the states for capital expenditure introduced in FY21 has been extended to FY25 as well with an outlay of Rs 1.3 trillion.
Of the Rs 1.3 trillion for FY25, Rs 55,000 crore in untied capex loans would be rolled out from April 1, 2024. The reform/project linked Rs 75,000 crore would be rolled out after the new government is formed in May-June.
Capex loans to states (Rs crore)
Budget Estimate: Rs 1.30 trillion
Revised estimate: Rs 1.05 trillion
Likely achievement: Rs 1.10 trillion
Source:financialexpress.com