Centre may save Rs 30,000 crore as states falter

The Centre is expecting savings of at least Rs 30,000 crore from its budgeted Rs 1.3 lakh crore assistance to states for capital expenditure in 2023-24, as the states have faltered in using the sanctioned amount, said people with knowledge of the matter.

The Centre has released Rs 60,104 crore under the Special Assistance to States for Capital Expenditure scheme in this financial year, of the sanctioned amount of about Rs 1 lakh crore so far, showed official data.

The amount is less than half of that allocated for this fiscal, as states including Andhra Pradesh, Kerala, Punjab and Manipur have failed to meet certain eligibility criteria under the scheme, while Maharashtra and Uttar Pradesh have yet to exhaust the first instalment.


The Centre released Rs 6,106 crore to Andhra Pradesh, Rs 1,903 crore to Kerala, Rs 798 crore to Punjab and Rs 467 crore to Manipur last fiscal year.

Under the scheme, the Centre extends 50-year loans to states at zero interest to step up their capex.

While the finance ministry wants states to exhaust the entire allocated amount for this fiscal to bolster their capex, based on the utilisation so far, a sizable chunk of the outlay may remain unspent, said officials.

Any unspent amount, on top of improved tax collection, would help the Centre meet or trim its fiscal deficit from the 2023-24 target of 5.9% of gross domestic product (GDP), especially when the nominal growth is estimated to be lower than the budgeted goal of 10.8% (after base revision). In 2022-23, the states utilised just over 81% of the Centre's budgeted amount of Rs 1 lakh crore.

Of the Rs 1.3 lakh crore allocated for the capex scheme, transfer of Rs 1 lakh crore remains unconditional and is linked to states' share of central taxes and duties.

However, the release of the remaining Rs 30,000 crore is tied to reforms in areas including scrapping of old vehicles, urban planning, making urban local bodies more creditworthy for municipal bonds, digital infrastructure and state share of capex in certain centrally sponsored schemes. "Some states haven't implemented the desired reforms to claim their share of the Rs 30,000 crore," said one of the officials, who did not wish to be identified. The Centre releases the second instalment of funds under the scheme only after the utilisation of at least 75% of the first instalment to ensure actual fund use.

The assistance to states forms part of the Centre's total capex outlay of a record Rs 10 lakh crore for this fiscal. It was part of the Centre's broader efforts to boost capex and spur economic growth, as it bet big on the multiplier effect of such spending, including crowding in of private investments, especially in the aftermath of the pandemic.

The Centre has increased its capex 24-39% annually since 2021-22, way above the increase in revenue spending. The outlay of Rs 10 lakh crore for this fiscal marks a 35.9% increase from the previous year.