No further extension for states to use capex loan, say sources

States are unlikely to be granted an extension to the deadline to utilise 45 per cent of their annual capex loan by October, central government sources tell Business Today Television.

Some states have reportedly requested a two-month extension from the expenditure department of the Union Finance Ministry, citing a backlog of work due to assembly elections. However, the expenditure department is concerned that such an extension could lead to a disruption.

The centre had already given an extension to the states to utilise a part of the first instalment by October, which was originally supposed to be completed by September 2023.

As of November 7, the government has sanctioned Rs 1.1 lakh crore, with Rs 67,000 crore already released in the first instalment. The release of the second and final instalment of Rs 33,000 crore is contingent on states achieving 45 per cent of their annual capex target (excluding central loans) by October and submitting utilisation certificates for 75 per cent of the funds from the first instalment.

"More than 16 states have availed this scheme, and approximately five may apply for the second instalment by December", an official said. The centre had announced these funds during Union Budget 2023 as part of the mega Rs 10 lakh crore capital expenditure plan.

These funds are allocated under the 'Special Assistance to States for Capital Investment 2023-24' initiative, designed to boost capital expenditure by state governments and acknowledge its potential to have a multiplier effect on the economy.

Under this program, state governments receive interest-free loans for a 50-year period, amounting to a total of Rs 1.3 lakh crore for the fiscal year 2023-24.

Also Read: Centre’s capex at Rs 1.16 lakh crore in September, highest so far in FY24