Centre Maintains Flow of Interest-Free Cash to States for Public Projects

New Delhi, Jun 25 (KNN) The Central Government has sanctioned Rs 15,000 crore and released Rs 10,000 crore in untied interest-free capital expenditure (capex) loans to state governments in the current financial year, maintaining a pace similar to the previous year.

This disbursement is part of the Rs 1.3 trillion capex support allocated for states in the interim budget for FY25.

The initial tranche of Rs 55,000 crore in untied capex loans was made available from April 1.

An additional Rs 75,000 crore in reform and project-linked loans is expected to be rolled out after the new government presents its budget next month.

In response to requests from state finance ministers during pre-budget consultations with Union Finance Minister Nirmala Sitharaman, the Centre is considering increasing the untied component of capex loans.

This could potentially raise the total allocation to Rs 1.5 trillion for 2024-25, up from the Rs 1.3 trillion provided in the interim budget. If approved, the untied portion could increase to Rs 75,000 crore from the current Rs 55,000 crore.

Several states, including Odisha, Chhattisgarh, and West Bengal, have advocated for higher untied loans, arguing that this would lead to more efficient fund utilisation and timely project completion.

The capex support scheme, introduced in FY21 during the COVID-19 pandemic, has been progressively expanded to stimulate economic activity nationwide.

In the previous fiscal year (FY24), out of the Rs 1.3 trillion facility, the Centre had approved Rs 25,727 crore and disbursed approximately Rs 4,000 crore by June 12, 2023. This accelerated to Rs 60,000 crore in approvals and Rs 30,000 crore in disbursements by July 8, 2023.

For the reform-linked component of the assistance, the Centre is considering collaborations with state governments to modernise legislation, by-laws, and urban planning processes through technology adoption.

This could involve support for long-term infrastructure projects through centre-state-city partnerships aimed at urban revitalisation.

Additionally, states may be incentivised to reduce compliance burdens for small traders and MSMEs to enhance ease of living and ease of doing business.

(KNN Bureau)