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Informist, Wednesday, Nov. 6, 2024

 

--Fin min source: Sanctioned INR 750-bln capex loans to states so far FY25 

--CONTEXT: Govt aims to give states INR 1.5 tln as capex loans FY25 
--Fin min source: Gave states INR 450 bln so far in FY25 as capex loans

 

By Priyasmita Dutta
 

NEW DELHI – The Centre has released around INR 450 billion to states so far in 2024-25 (Apr-Mar) as part of the Scheme for Special Assistance to States for Capital Expenditure in the form of 50-year interest-free loans, a senior finance ministry official said Wednesday. The Union Budget for FY25 had set aside INR 1.50 trillion to be disbursed to states for capital expenditure under this scheme. The allocation is part of the government's total capital expenditure target of INR 11.11 trillion for FY25.

 

So far, the Centre has approved around INR 750 billion to states as loans for capital expenditure, lower than what the government had approved in the corresponding period last year, the official told Informist. "The loans disbursed so far are majorly from the untied portion but some of it is also from the tied portion," the official added. 

 

Typically, the special assistance scheme to states for capital investment has multiple parts, with the majority of it being untied or simply based on the 15th Finance Commission's recommendation for states' share in central taxes. The other parts are conditional on the fulfilment of reforms and infrastructure development.

 

Unlike previous years, the Department of Expenditure under the finance ministry had lowered the untied portion of the loan to INR 550 billion, or 37% of the overall loan in FY25. Last year, the government had kept INR 1.00 trillion or 77% of the total loans of INR 1.30 trillion as untied. 

 

First launched in the Budget for FY22, the Scheme for Special Assistance to States for Capital Investment is in line with the government's thrust on capital expenditure to drive economic growth. The total amount disbursed under the scheme last year was INR 1.10 trillion, against the Budget estimate of INR 1.06 trillion. 

 

Owing to the slow pace of capital expenditure so far and considering the majority portion of the loans are linked to certain conditions, there are doubts in certain quarters about whether the entire INR 1.5 trillion will be absorbed by states. The Model Code of Conduct, which came into effect on Mar. 16, slowed down the pace of spending as central and state governments could not announce new investments, but could only take forward the projects already underway. The Lok Sabha elections were held from Apr. 19 to Jun. 1, with the results announced on Jun. 4.  End

 

Edited by Tanima Banerjee

 

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