Capex loan disbursements face election-related delay in September quarter

Assam, Rajasthan, and Andhra Pradesh are leading in capex loan utilisation.

The Centre’s capex loan disbursements to states, aimed at boosting capital spending, lost momentum in the September quarter, with Rs 40,000 crore disbursed in the first half of FY25 and sanctions reaching Rs 70,000 crore, short of the Rs 1.5 lakh crore annual goal.

A senior government official attributed the delay in disbursements to the general elections, which led to reform guidelines being issued in August instead of February, hindering the state’s ability to implement the necessary reforms.

“Haryana has not sent any proposal seeking capex loans so far due to state elections,” the official said, adding that the government expects a pickup in loan disbursements after December, as states fulfil conditions such as reforms in land records, creation of a farmer registry, and vehicle scrapping.

Despite the slow start, the government is optimistic about meeting the Rs 1.5 lakh crore target for FY25. “We expect full utilisation by the end of the fiscal year. The first half of FY25 saw project approvals worth Rs 70,000 crore, though only Rs 40,000 crore was released. Assam, Rajasthan, and Andhra Pradesh are leading in loan utilisation. The projects are spread across sectors, roads, irrigation, etc.,” the official said.

The capex loans include Rs 55,000 crore in untied funds, which are allocated based on the centre-state devolution formula, and Rs 95,000 crore tied to state-level reforms. The delay in disbursements primarily affects the tied portion, as the states need time to comply with guidelines.

“States will likely implement the required reforms by December and seek loans under the tied part. Proposals from Assam, Rajasthan, and Andhra Pradesh have already made progress,” the official said.

Linked to state capex

Additionally, Rs 25,000 crore of the conditional loans is linked to a 10 percent capex growth by states. Half the loan amount is tied to a state’s performance in FY24, with the remaining linked to the current fiscal year’s 10 percent capex growth in April-September.

“Out of the Rs 25,000 crore, 50 percent will be given to the 17 states whose capex exceeds 10 percent in FY23-24, and the rest will be released based on their FY25 performance,” the official added.

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There are also sector-specific projects in the tied part, like capex loans for tourism and hostel projects for working women.

The Centre had previously allocated Rs 1.30 lakh crore in FY24, later reduced to Rs 1.05 lakh crore as Andhra Pradesh, Kerala, and Punjab failed to meet eligibility requirements.