States completing projects in time may get priority in Centre's Special Loan Plan

States completing projects on time may be given priority in the Centre's interest-free 50-year special assistance loan from 2025-26, said officials.

The Department of Expenditure is finalising the conditions for the 50-year interest-free loan to states and could introduce some measures to make it flexible for the states, they said.

"A key condition will be completion of projects," a senior official told ET on condition of anonymity, adding that the idea is to minimise project delays and cost overruns.


Under the scheme, states are required to undertake certain reforms to obtain loans under this window. The portions linked to capex and other reforms will be retained, but some conditions may be tweaked, according to the official.

Funds are allocated to states in proportion to their share of central taxes and duties as per the award of the 15th Finance Commission.

The Centre has budgeted ₹1.50 lakh crore for this scheme for the next financial year, higher than the revised estimates of ₹1.25 lakh crore for the current fiscal.

For this financial year, the government initially allocated ₹1.5 lakh crore, out of which ₹95,000 crore was linked to reforms, including ₹25,000 crore for capex performance, urban and rural land reforms and power sector reforms. The balance of ₹55,000 crore was untied advances for projects identified by the states.

But on account of the general election and assembly elections in some states, the states were not able to use the amount and the Centre had to revise it down to ₹1.25 lakh crore and relax some conditions for the last quarter.

The Centre was able to assign ₹1.15 lakh crore under the scheme to states as on February 15.

"We are confident of meeting the revised target," said the official.

The Centre had allocated ₹1.30 lakh crore under the scheme for 2023-24, but in the interim budget, it slashed the outlay for the capex facility by 19% to ₹1.05 lakh crore.

For the current year, the conditions stipulate that the states will receive 50% of their corresponding share only if they report a capex growth of at least 10% in 2023-24 and the remaining 50% if they achieve 10% capex growth in the current fiscal. Besides, ₹15,000 crore is linked to industrial growth and livelihood-friendly cities, another ₹15,000 crore to completion of major urban and rural infrastructure projects such as railways, metro rail, highway and power projects, ₹5,000 crore to urban land reforms and ₹5,000 crore to rural land reforms.

Other parameters include the performance of the states on GIS mapping, marking of land parcels as per current ownership, assignment of unique land parcel identification number and digitisation of land registry process.