Centre links interest-free capex loans to states’ reform rollout

livemint.com:

NEW DELHI : A central scheme for states introduced during the early days of the covid-19 outbreak to provide interest-free capital-expenditure (capex) loans will now come with strings attached as the government attempts to nudge states to implement specific reforms. Out of the ₹80,000 crore earmarked this fiscal for the ‘Special Assistance to States for Capital Investment’ scheme, ₹40,000 crore has already been disbursed without conditions; of the rest, ₹30,000 crore will be disbursed only if states can show progress on reforms or present specific project proposals, two people aware of the plan said on condition of anonymity.

States must also ensure that the loan is used to supplement their capex and not used as a substitute for it. “Roughly about ₹80,000 crore interest-free loans have been sanctioned for this year.

Approximately half of the sanctioned amount, or about ₹40,000 crore, has been disbursed to states so far," said one of the two people. “After using the first instalment, states can come back for the second instalment but will have to meet certain conditions to avail of the loan," the person said, adding the second instalment will be linked to reforms or sector-specific projects.

A Union finance ministry spokesperson didn’t respond to queries. The conditions that states will have to meet 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 setting up libraries with digital infrastructure at panchayat and ward levels for children and young adults.