Rs 1 trillion special capex loan: Center asks states for details of projects ready for funding

The Center has asked state governments to give details of the projects that are ready to be financed under the special 1 trillion state capex loan, a senior official said. The central government is keen for all loan funds to be invested in asset-creation projects in the current fiscal year, kick-starting capital formation in the economy.

The official said that about 80% of the 50-year soft loan to the states would be released based solely on the viability of the projects, while the release of the balance would depend on the states implementing specific reforms aimed at improve the productivity of the economy. , in some critical areas. The Center released the guidelines in this regard to states last week.

“Part of the tied funds of Rs 20,000 crore will be allocated for infrastructure connectivity projects such as laying of fiber optic cables for last mile connectivity under BaratNet in rural areas and road projects under the GatiShakti master plan,” the official said. Some funds would also be earmarked for urban sector reforms and urban planning programs.

In the FY23 budget, Finance Minister Nirmala Sitharaman announced Rs 1 trillion support to states to ensure the momentum of capital spending is not lost due to lack of funds , following the discontinuation of Goods and Services Tax (GST) revenue coverage effective July 1. , 2022. The capex support is considered sufficient to cover any shortfall in states’ GST revenue in FY23 relative to the protected level. The support will be beyond their borrowing limit of 4% of the state’s gross domestic product (GSDP).

As for untied funds of around Rs 80,000 crore, allocations between states will be proportional to their share of central taxes. However, the release of tied funds will be based on the milestones achieved by each state and not on the Finance Commission formula, the official added.

“We solicited proposals based on projects from the States. As they arrive, we will eliminate them,” the official said. Project preparation is important because funds will be transferred for individual projects, not in lump sums.

Out of `15,000 crore earmarked for 50-year interest-free special assistance to states for FY22, the Center originally stipulated that a state was eligible for one-third of its share, it had to monetize/recycle the assets of infrastructure and sell its shares in public sector companies. But these found no takers as states stressed they had limited scope when it comes to monetizing and divesting assets. The Center then removed these conditions and released funds for projects identified by states in FY22.

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