Govt. has released 75% of interest-free loans meant for states: Pankaj Chaudhary | Mint
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Business News/ News / Govt. has released 75% of interest-free loans meant for states: Pankaj Chaudhary
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Govt. has released 75% of interest-free loans meant for states: Pankaj Chaudhary

The government introduced the loan scheme during the Covid-19 outbreak to provide assistance to states, but has since set conditions to nudge administrations to implement specific reforms

The Union government has set urban planning as one of its key reform conditions for states to avail of the interest-free loans. (Mint) Premium
The Union government has set urban planning as one of its key reform conditions for states to avail of the interest-free loans. (Mint)

NEW DELHI : The government has released about Rs60,104 crore in interest-free, capital expenditure loans to states, out of the Rs80,000 crore earmarked for this fiscal year, minister of state for finance Pankaj Chaudhary informed the Lok Sabha on Monday.

The loans fall under a Union government scheme called ‘Special Assistance to States for Capital Investment’, which was introduced during the early days of the Covid-19 outbreak.

Responding to questions from parliamentarians Gajanan Kirtikar and Krupal Balaji Tumane, Chaudhary said the government had disbursed 60,104 crore to 24 states as of 6 December. Andhra Pradesh, Kerala, Manipur, and Punjab were not eligible for the loans, he added, as these states didn’t meet specific reform conditions.

Mint reported in August that the scheme would have strings attached as the government sought to nudge states to implement specific reforms.

In FY2023, the government had disbursed Rs81,195.35 crore to 28 states under the scheme, significantly higher than the Rs11,830.29 crore and Rs14,185.78 crore disbursed in FY2021 and FY2022, respectively. 

So far in FY2024, Uttar Pradesh has received the highest monetary assistance under the scheme (Rs12,458.43 crore), followed by Bihar (Rs6,135.54 crore), Madhya Pradesh (Rs5,325.60 crore), West Bengal (Rs5,015.58 crore), Rajasthan (Rs3,987.91 crore), Maharashtra (Rs3,457.61 crore), Odisha (Rs3,039.77 crore), and Assam (Rs2,841.21crore).

A senior government official had earlier told Mint that states needed to ensure that they would use the interest-free loans to supplement their capital expenditure and not as a substitute for it.

Conditions that states need to meet to avail the loans include reforms in the housing sector; providing incentives for scrapping old government vehicles and ambulances; reforms in urban planning and urban finance; increasing housing stock for police personnel; and establishing libraries with digital infrastructure at panchayat and ward levels for children and young adults.

Introduced in FY2021, the interest-free loan scheme with a tenure of 50 years has played a vital role in stimulating capital spending by states and catalysing the overall economy in the aftermath of the pandemic.

According to finance ministry data, proposals totaling Rs95,147.19 crore were approved, and 81,195.35 crore of loans were disbursed to the states in FY2023 under the scheme.

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Published: 11 Dec 2023, 08:06 PM IST
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