Govt okays capex of ₹60,000 cr to states
NEW DELHI: The central government has sanctioned ₹60,000 crore of long-term capital expenditure funds to states this fiscal, making a strong beginning to the scheme announced earlier this year to build roads, ports, bridges, airports, and highways across the country.
The scheme envisages giving ₹1 trillion of 50-year interestfree loans to states, over and above the normal borrowing they are allowed. The aim is to ensure that local administrations get more financial resources for building productive assets, which will also add jobs.
Uttar Pradesh, West Bengal, Madhya Pradesh, and Bihar have emerged as the biggest gainers from the infrastructure financing scheme announced in the FY23 budget, said a person informed about the scheme’s operation.
“Financing of capital expenditure by states under the scheme is by and large progressing as per plan. So far, the government has sanctioned ₹60,000 crore under the scheme, of which ₹30,000 crore has already been released,” the person cited above said on condition of anonymity. The scheme entails ₹80,000 crore to be given based on the Fifteenth Finance Commission (FFC) formula and ₹20,000 crore, which is linked to reforms. The Centre wishes to leverage the scheme to bring reforms at the state level, which would help improve ease of doing business.
An email that was sent to a finance ministry spokesperson on Wednesday seeking comments for the story has remained unanswered at the time of publishing.
While capex disbursement under the scheme has moved smoothly under the FFC formula, reforms by states are an area where things are still moving slowly, something that has prevented the full release of the funds so far, the person added.
However, with the government already allowing states an additional borrowing window of 0.5% of gross state domestic product for carrying power sector reforms, it is expected that several states would pursue broad reforms to access these funds.
“Capex spending by states is set to pick up in the second half of the year, following the trend witnessed in central sector projects, especially road and highways, where the pace of construction remained slow in the first half of FY23, continuing on the disruptions caused by the third wave of covid and a prolonged monsoon late into 2021-22. The second half could pick up pace, which would also use up entire long-term capex funds kept by the Centre,” said a second person, also on condition of anonymity.
He added that there is a case for the Centre to consider raising this long-term capex funds for states in next year’s budget, given its use and demand.
The amount sanctioned so far shows a fourfold jump from the allocation made in the first year of the scheme—₹15,000 crore in FY22, indicating it is being well received by states. Given its multiplier effect, infrastructure building is a key part of the government’s strategy for economic growth and is a key element of Prime Minister Narendra Modi’s vision of a new India.