Centre clears Rs 1.22 trillion in interest-free loans to states under Special Assistance Scheme: Report

Originally launched in FY21 with Rs 12,000 crore, the scheme has seen a significant rise in allocations over the years

The Centre has approved nearly 97 percent of the funds allocated to states under the Special Assistance to States for Capital Investment scheme during the first 10 months of the ongoing fiscal year, Mint reported, citing sources.

The scheme, which provides interest-free loans for 50 years, saw approvals totaling Rs 1.22 trillion out of the revised estimate of Rs 1.25 trillion for FY24.

Breakdown of Allocations

According to Mint, Rs 55,000 crore has been earmarked for states based on their share of central taxes and duties, while Rs 95,000 crore has been linked to state-led reforms. These include:

• Developing iconic tourist centers
• Incentivising vehicle scrappage
• Boosting industrial growth
• Advancing infrastructure in the National Capital Region

Originally launched in FY21 with Rs 12,000 crore, the scheme has seen a significant rise in allocations over the years, touching Rs 1.3 trillion in FY24, of which Rs 30,000 crore was marked as outcome-based assistance.

State-Wise Distribution

Among the biggest beneficiaries of the interest-free capex loan, during April-January FY24, were:

• Uttar Pradesh – Rs 13,042 crore
• Bihar – Rs 12,907 crore
• Madhya Pradesh – Rs 10,635 crore
• West Bengal – Rs 9,729 crore

Push for Infrastructure Growth

A second official told Mint that loan approvals picked up pace in the second half of the fiscal to accelerate infrastructure spending and capital projects at the state level, ultimately supporting economic growth.

The Department of Expenditure releases funds based on compliance with centrally sponsored schemes and transparency in fund management, while reform-linked allocations require nodal ministry recommendations, the report added.

Moneycontrol could not independently verify the report.