States asked to expedite capex loans utilisation

New Delhi: The Department of Expenditure (DoE) has asked states to quicken utilisation under the Centre's ₹2 lakh crore interest-free capex loan program, with only about a quarter of the budgeted amount used so far, people familiar with the matter told ET.

In letters sent in the first week of October, DoE flagged slow utilisation under the Scheme for Special Assistance to States for Capital Investment (SASCI), with several states yet to draw available funds or submit utilisation certificates, officials said.

The department has directed officials to reach out to states for utilisation certificates and also speed up approvals, among other measures. The Centre has released around ₹51,000 crore under SASCI as on October 1 and has sanctioned loans worth ₹67,000 crore. Releases account for about 26% of the ₹2 lakh crore allocation for the year, while actual utilisation remains lower. The Centre's push comes amid concerns that delays in deploying the funds could hold back state-level capital expenditure, a key component of the government's broader public investment strategy. "This year the budget under the SASCI scheme is generous, but we have seen a slowdown after July," a senior official told ET, who did not want to be identified.

The centre has already released ₹44,500 crore till July. Officials added that the centre is confident that states would absorb the full allocation in the second half of the fiscal year. The department is working closely with the states to resolve implementation bottlenecks, including helping identify suitable projects and facilitating faster clearances so that available assistance translates into expenditure on the ground, the official added.

Introduced in FY22, SASCI provides states with 50-year interest-free loans to boost capital investment in infrastructure and other projects. The scheme is a key component of the Centre's effort to use public capital expenditure to support economic growth, with state spending complementing investment by the Union government.

This year, the united component, distributed largely on the basis of states' share in central taxes, accounts for 37.5% of the total allocation, and the rest is dependent on a series of reforms, which states can take up. The scheme also includes ₹25,000 crore to incentivise states to meet capital expenditure targets and ₹25,000 crore for the development of hilly states, recognising their distinct geographical and fiscal constraints and introducing an incentive for the states for fiscal prudence.