interest free loan: Centre earmarks Rs 80,000 crore interest-free loans for states undertaking capital works in FY’23

The Centre has earmarked Rs 80,000 crore as interest-free loans for states undertaking capital works in the current fiscal. In her 2022-23 Budget speech, Finance Minister Nirmala Sitharaman had announced the ‘Special Assistance to States for Capital Investment’ scheme under which total financial assistance of Rs 1 lakh crore would be given to states in the form of 50-year interest-free loans for capital investment projects.

Issuing the guidelines for implementing the scheme, the finance ministry said Rs 80,000 crore is reserved for capital works to be undertaken by the states.

To avail the benefit for investments made this fiscal, states will have to submit details like name of the project, capital outlay, completion period and its economic justification to the expenditure department of the Union finance ministry.

“… states are required to submit capital works proposed to be taken up by them in 2022-23… to the Department of Expenditure for approval and release of funds,” the expenditure department said in a letter dated April 6 sent to all state governments.

Projects under PM Gati Shakti Master Plan will receive priority, it added.

The ‘Special Assistance to States for Capital Investment’ scheme also includes Rs 5,000 crore interest-free loans which would be provided to incentivise states to undertake privatisation or disinvestment of state public sector enterprises and asset monetisation.

Under this head, states would be incentivised to privatise or undertake strategic sale along with transfer of management control of state PSUs besides listing of PSUs on the stock exchanges.

Such incentives to a particular state would be limited to Rs 1,000 crore, the expenditure department added.

In her budget speech, Sitharaman had announced that the ‘Special Assistance to States for Capital Investment’ scheme allocation will be used for PM

Shakti related and other productive capital investment of the states.

Besides, allocation would be made for digitisation of the economy, including digital payments and completion of optical fibre cable network, and reforms related to building bye-laws, town planning schemes, transit-oriented development, and transferable development rights.

The total Rs 1 lakh crore scheme also includes Rs 4,000 crore for PM Gram Sadak Yojana, Rs 2,000 crore digitisation incentive, Rs 6,000 crore towards urban reforms and Rs 3,000 crore for capital projects on optical fibre cable.

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