Loan: Considering the current trends, states are probably going to be able to use about Rs 1 trillion of the Rs 1.3 trillion interest-free, 50-year capital project loan facility from the Center for the current fiscal year.
Over half of the capex loan facility, or Rs 1.1 trillion, had already been disbursed by the time the Center approved it on November 7. The tied component of the Rs 1.3 trillion total expenditure for capital expenditure loans to states in FY24 is Rs 0.3 trillion.
Owing to time constraints brought on by a slew of state elections by the end of 2023, the Center loosened regulations to allow the release of two-thirds of the unpaid loans, or Rs 0.67 trillion, in the first installment alone rather than the first plan’s original goal of releasing one third, or Rs 0.33 trillion.
In order for states to receive the Rs 0.33 trillion second/final installment, they must first submit utilization certificates for 75% of the funds released to them in the first installment and reach 45% of their annual capital expenditure target (excluding central loans) by September.
States, whose capex is typically about 30% in H1, asked the Center to extend the deadline. Therefore, the deadline for states to reach 45% of their goal by October was extended by the Center.
After reaching the goal, three or four states have already requested to receive the second installment. According to a senior official, other states that have reached the 45% target should submit applications for the second installment next month.
While Andhra Pradesh has been excluded from the capital expenditure scheme (capex scheme) due to noncompliance with fiduciary standards, including central scheme branding requirements, certain states, like Karnataka, are falling behind in capex. Karnataka has only met 17% of its yearly capital expenditure target in H1, while Punjab has only met 14%.
The official stated, “Overall, we want the states to utilize the facility fully in FY24, but no more extension will be given to meet 45% of their capex target.” States will undoubtedly use approximately Rs 1 trillion in FY24.
