Finance Minister Nirmala Sitharaman on Thursday exuded confidence that States will sign up as early as April to avail the ₹1.3 lakh crore of interest-free loans offered to them in Budget 2023-24 for capital expenditure, much faster than they did in the current financial year.
This 50-year interest-free loan window for States constitutes a critical part of the government’s ambitious ₹10 lakh crore capex push for the coming year, and the Finance Minister asserted that the scheme’s outlay was raised from ₹1 lakh crore allocated this year only because States had shown interest.
Data relating to the scheme released in the Economic Survey tabled in Parliament this week appeared to suggest those funds had not been fully tapped by States. But Ms. Sitharaman stressed that States’ use of these funds is “not all all that disheartening as you would have inferred from the Survey.”
“It was delayed in its launch a bit because States had to come up with proposals and then set it rolling… This year, it has been increased for two reasons . One we felt there was a good appetite for more funds and continuation of the scheme. That’s not possible if they [States] didn’t absorb it last year,” she said at a post-Budget interaction hosted by FICCI.
Moreover, she pointed out that a ‘good chunk’ of the ₹1.3 lakh crore loans on offer can be used by States on projects they prefer, while a portion of it will be conditional and linked to projects that encourage for instance, municipal bond issuances and building of Unity Malls in States’ capitals.
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“Actually, this year, we have been talking through officials with the Chief Secretaries of State governments to see that this moves fast and early. My strong belief is that in the month of April itself, there should be a substantial number of proposals coming from many States so the release can happen straightaway, unlike last year,” she noted.
“A lot of discussions have already happened with States on the contours of the scheme, the different features from the current year and if is it going to be very onerous to implement and so on. So all the differences have been ironed out,” the Minister said, adding that the Centre was pushing schemes that speed up capital expenditure while carrying forward critical reforms such as building accommodation for police personnel in the States.
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Interest-free loans for States with a tenure of 50 years to implement capital expenditure were first introduced by the government following the onset of the COVID-19 pandemic in 2020-21, starting with an outlay of ₹12,000 crore, which was raised to ₹15,000 crore next year.