Pre-Budget Consultation: States seek more fiscal support for capex plans

Jaisalmer: Several states Friday asked the Centre to enhance the allocation under 50-year interest-free loans while continuing the window, provide greater flexibility for assistance under the capex scheme and increase the borrowing limit to support their local economies. In a customary pre-budget consultation with Union finance minister Nirmala Sitharaman, a few states also said they wanted a borrowing mechanism for some of their agencies on the lines of the central agencies.

There was also demand for state-specific projects on road development and railway, and for the Centre to bear a larger share of land acquisition costs for projects.

FM will present the budget in February.


At the meeting, she said that because of healthy macroeconomic environment, buoyancy and efficiency in the tax collections, the funds devolved to the states in the past 45 months (April 2021 to December 2024) under the 15th Finance Commission had exceeded those devolved in 60 months under the 14th Finance Commission (2015-20).

Also Read: India considers exempting gift vouchers from GST; Council to discuss key issues

Additional funds sought
The FM also highlighted the Scheme for Special Assistance to States for Capital Investment (SASCI), which was first announced in the 2020-21 Union budget, saying it had received a very good response from the states, as per an official statement.

States also sought additional funds for disaster relief, and assistance under the Jal Jeevan Mission to set up water storage facilities. Many wanted the borrowing ceiling raised to 3.5% of the GSDP (gross state domestic product) for 2025-26 from 3% now sans any conditions.

"There is an urgent need for strengthening the economy for which the growth of sub-national economies is also critical," Kerala finance minister K N Balagopal said, seeking a special ₹2,000 crore package in the upcoming Union budget, besides a ₹24,000 crore package immediately to tide over the liquidity stress by scheduling it over two years from 2025-26.

The FY25 budget, presented in July, had unveiled an enhanced long-term interest-free loan of ₹1.5 lakh crore for states to bolster their capital spending.

West Bengal finance minister Chandrima Bhattacharya said the state, facing frequent cyclones, had sought that half the funds allocated under the 50-year loan window be given only for disaster relief and mitigation. Punjab finance minister Harpal Singh Cheema said the state wanted a ₹1,000-crore special package to strengthen state police to tackle the drone menace.

Maharashtra sought funds for Mukhyamantri Majhi Ladki Bahin Yojana and sought that a centrally sponsored scheme (CSS) be started with the Centre and state sharing 50% of the cost each. Goa chief minister Pramod Sawant said devolution to the states had increased substantially following the 15th finance commission and expressed hope that it could further go up when the 16th finance commission gives its recommendations. Telangana deputy CM Mallu Bhatti Vikramarka said the Centre should give flexibility to states to use CSS funds and not insist on branding. He also demanded that the Andhra Pradesh bifurcation Act be implemented fully.