Key Points
The Centre will link a large chunk of 50-year interest-free loans to states with specific outcomes, in a bid to nudge them to make capital investments for infrastructure in a time-bound manner, a senior finance ministry official said..
. Of the 1.3 trillion earmarked for the special assistance to states for capital investment scheme in the interim budget 2024-25, about 75,000 crore, or 58%, will be linked to outcomes and reforms carried out by the states, Union finance secretary T.V..
The remaining 55,000 crore will also come with a simple condition", Somanathan said: For availing the 55,000 crore interest-free loan, it (the infrastructure project) should be incremental; dont use this to substitute your capital expenditure, make it over and above your last years overall capital expenditure.".
The conditions states had to meet in the ongoing fiscal year (FY24) to avail the central loans included reforms in the housing sector, providing incentives for scrapping old government vehicles and ambulances, reforms in urban planning and urban finance, increasing housing stock for police personnel, and setting up libraries with digital infrastructure at panchayat and ward levels for children and young adults..
In FY24, as many as 16 states opted for the loan scheme, namely Arunachal Pradesh, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Mizoram, Odisha, Rajasthan, Sikkim, Tamil Nadu, Telangana and West Bengal. . Finance minister Nirmala Sitharaman said in an interview with Mint that projects are best developed when the capex is used up within 12 months, even though several capital expenditure projects have long gestation projects running into 24 to 36 months or more..
