The Center has announced loan incentives for states that have reached the capital expenditure target. The Center has given the green signal to 11 states, including Andhra Pradesh for additional borrowing. The Finance Ministry has permitted 11 States to borrow an additional amount of Rs 15,721 crore after these states achieved the capital expenditure target set for the June quarter.
Andhra Pradesh completed 15 percent of its capital expenditure in the first quarter. The Center has allowed AP to raise Rs 2,655 crore. The Center has given an incentive of 0.50 percent on the net loan limit of four percent of Gross State Domestic Product (GSDP).
The other States are Bihar, Chhattisgarh, Haryana, Kerala, Madhya Pradesh, Manipur, Meghalaya, Nagaland, Rajasthan and Uttarakhand.
"11 states have achieved the target set by the Ministry of Finance for the capital expenditure in the 1st Quarter of 2021-22. As an incentive, these States have been granted permission by the Department of Expenditure to borrow an additional amount of Rs 15,721 crore," the Ministry said in a statement. The additional open market borrowing permission granted is equivalent to 0.25 percent of their Gross State Domestic Product (GSDP). Additional financial resources thus made available will help the States in pushing their capital expenditure further. The target for incremental capital expenditure for each state to qualify for this incremental borrowing was fixed by the Department of Expenditure.
To become eligible for incremental borrowing, States were required to achieve at least 15 percent of the target set for 2021-22 by the end of April-June quarter of 2021-22, 45 percent by the end of second quarter, 70 percent by the end of third quarter and 100 percent by March 31, 2022. The next review of Capital expenditure of States will be undertaken by the Department of Expenditure in December 2021. In this round, capital expenditure achieved by the States till September 30, 2021 will be assessed.
The capital expenditure-linked borrowing ceiling of 0.50 percent of GSDP will be allowed to those States who will achieve actual capital expenditure of at least 45 percent of the target by September 30, 2021 or 70 percent of the target by December 31, 2021, the Ministry said in its statement.