October 26, 2023
Out of the total capex loan facility of INR 1.3 trillion for states in FY24, the Center has already issued sanction letters totalling INR 0.94 trillion to states during H1FY24
In September 2023, untied capital expenditure of INR 16,006 crore was released to eligible states under a government scheme
The combined capital expenditure of 17 major states increased by 45% to approximately INR 1.67 trillion in the first five months of the current fiscal year
Out of the total capex loan outlay of INR 1.3 trillion for states, INR 0.3 trillion is in the form of tied loans
In the first half of FY24, the Central government has disbursed interest-free loans to state governments for asset-creating projects, amounting to INR 0.54 trillion, which represents 57% of the sanctioned amount for the fiscal year.
Out of the total capex loan facility of INR 1.3 trillion for states in FY24, the Center has already issued sanction letters totalling INR 0.94 trillion to states during H1FY24.
Comparatively, in the first half of the preceding fiscal year, the Center had sanctioned INR 0.51 trillion out of a total facility of INR 1 trillion, but no disbursements had occurred.
In September 2023, untied capital expenditure of INR 16,006 crore was released to eligible states under the Scheme for Special Assistance to States for Capital Investment 2023-24.
Thanks to the early allocation of capex loans by the Central government, state governments’ capital expenditure has grown much faster in the April-August period of the current fiscal year compared to the same period in the previous year.
The combined capital expenditure of 17 major states, according to media reports, increased by 45% to approximately INR 1.67 trillion in the first five months of the current fiscal year, up from INR 1.15 trillion in the same period of the previous year.
Out of the total capex loan outlay of INR 1.3 trillion for states, INR 0.3 trillion is tied loans.
Due to time constraints arising from a series of state elections by the end of 2023, the Center has relaxed the norms for releasing two-thirds of the untied loans, amounting to INR 0.67 trillion, in the first instalment, as opposed to the earlier plan to release one-third, or INR 0.33 trillion, in the first instalment.
The final instalment of INR 0.33 trillion under the untied portion will be disbursed upon utilisation of 75% of the amount released in the first instalment and upon meeting 45% of the total state budget target set for capital expenditure by each state in FY24 from April to September.
States that have already received sanction and are receiving loan disbursements include Uttar Pradesh, Karnataka, Madhya Pradesh, Odisha, Rajasthan, Tamil Nadu, Telangana, West Bengal, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, and Himachal Pradesh.
Although capex disbursements in FY24 are being frontloaded and may exceed INR 1 trillion, they might fall short of the INR 1.3 trillion target due to conditionalities that some states may not fully meet.
Source: Financial Express