Out of the  Rs.1.3 trillion to be given as long term loans for capex needs to the states, how much has been decided to be kept as untied funds by the central government?

Solution

The central government has placed strict conditions on states to avail of the Rs 1.3 trillion in long-term loans for their capital expenditure (capex) needs in the approaching fiscal year (2023-24, or FY24) to ensure effective utilisation of funds     Of the Rs 1.3 trillion, Rs 1 trillion will be ‘untied funds’. The rest will be tied to specific purposes like the scrapping of old government vehicles, urban planning reforms, financing reforms in urban local bodies to make them creditworthy for municipal bonds, housing for police personnel, constructing unity malls, libraries for children and adolescents, digital infrastructure, and state share of capex of central schemes.The untied amount of Rs 1 trillion will be divided into three equal instalments of roughly Rs 33,333 crore each.     The first instalment will be given to states after their capital projects are approved. The second tranche will be given once states have spent at least 75 per cent of the first instalment. The third tranche will be given on spending 75 per cent of the first two instalments and 45 per cent of states’ respective capex targets for FY24.