The Union government by the end of February disbursed more than 90% of the over ₹1.05 lakh crore committed in 2023-24 as interest-free, long-term loans to states for capital expenditure, two officials said. The remaining amount is expected to be released by March 31.

As on February 29, the Centre released more than ₹95,226 crore under the scheme to nudge states into making capital investments with extremely positive response from them, they said, requesting anonymity.

The government on February 1 slashed the initial corpus of ₹1.3 lakh crore in the budget estimates (BE) for 2023-24 to ₹1.06 lakh crore in the revised estimates (RE) for the financial year to March 31. The downward revision was mainly because some states could not meet the eligibility criteria and some had high unspent balance from 2022-23, they said.

Also Read | Every penny due for Karnataka given on time: Finance Minister Nirmala Sitharaman on CM Siddaramaiah’s claim

Although the amount for 2023-24 was reduced, the Centre is committed to meet the entire requirement under the scheme in the financial year, they said, citing example of 2022-23. In that fiscal year, the government initially announced ₹1.07 lakh crore under the scheme, kept it at ₹1 lakh crore in BE, revised it to ₹76,000 crore at RE stage, and finally released ₹81,195.35 crore on actual demand.

The amount is likely to exceed the revised estimates even in 2023-24 as there has been a sharp jump in the disbursements since January. After states started providing utilisation certificates for projects, about ₹28,481 crore was released in just one month (February), which was about 27% of the entire corpus.

Also Read | India’s 2024 GDP may see another push, to rise from 6.1% to 6.8%: Report

“The scheme has been very successful in nudging states to undertake citizen-centric reforms. A redesigned scheme for 2024-25 is intimated to states on February 26 with a corpus of ₹1,30,000 crore, which includes incentives for developing tourist centres to global scale,” one of the officials said. A detailed guideline for it will be intimated to them shortly, he added. To avail the fund, states must undertake that they would not change the name and brands of any centrally sponsored scheme.

The scheme — special assistance to states for capital expenditure — was first launched with a small corpus of ₹12,000 crore in 2020-21. As it became an instant hit, the Centre gradually raised the amount, starting from ₹15,000 crore in 2021-22 to ₹1.30 lakh crore in the 2024-25 (BE).

When the scheme was first launched, ₹2,500 crore was earmarked for the northeast and hill states (called part-I), ₹7,500 crore was allocated to other states in proportion to their share in central taxes (part-II) and ₹2,000 crore was provided under the part-III of the scheme if states carried out citizen-centric reforms, such as implementation of the one nation, one ration card system, implementation measures for ease of doing business, reforming local bodies and power sector reforms.

The next year, the allocation was raised to ₹15,000 crore – ₹2,600 crore for part-I, ₹7,400 for part-II and ₹5,000 crore for part-III, which included divestments of state enterprises and asset monetisation. The scheme saw a 613% jump in allocation in 2022-23 at ₹1.07 lakh crore — ₹80,000 for states in proportion to their share of central taxes as per the award of the 15th Finance Commission and an incentive ₹27,000 crore for seven types of reforms — PM Gati-Shakti related expenditure, supplemental funding for Pradhan Mantri Gram Sadak Yojana, incentive for digitisation, capital projects on optical fibre cable, urban reforms, asset monetisation and scrapping of old vehicles.

Initially, the scheme in 2023-24, the BE had an increased corpus of ₹1.30 lakh crore — ₹1 lakh crore under part-I and incentives of ₹30,000 crore for undertaking specific reforms such as scrapping old vehicles, urban reforms and making urban local bodies creditworthy.