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‘No CM logo after taking central fund’ — Why Modi government put rider on interest-free loans

Money will be disbursed only after the Centre is assured that funds secured under the Special Assistance to States for Capital Investment will have its branding, says an official.

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New Delhi: The Narendra Modi government, in an attempt to prevent states from monopolising the limelight, has mandated that the states availing the 50-year interest-free loans in 2022-23 will have to use the Centre’s branding in advertisement of the schemes for which these funds are used, ThePrint has learnt.

In her budget speech on 1 February, Finance Minister Nirmala Sitharaman had announced that the central government, through its ‘Special Assistance to States for Capital Investment’ scheme, would extend interest-free loans of Rs 1 lakh crore with a tenure of 50 years to states for catalysing overall investments in the economy.

There are two riders for the states to comply with for availing loans under this scheme the first being that they have to share all data related to the implementation of centrally-sponsored schemes on a Single Nodal Agency (SNA) dashboard of the Public Financial Management System. This will allow the Centre to monitor where the states are channelising and spending the funds.

The second provision is that the Narendra Modi government wants the states to sign an undertaking that any scheme that uses this fund cannot have state-specific branding alone since the money is coming from the Centre, irrespective of whether it’s a loan.

“A lot of states take the money from the Centre but use it for their own schemes and use their own chief minister’s branding. That is not done,” a senior government official told ThePrint, adding that the money will be disbursed only after the Centre is assured that funds secured through these loans will have its branding.

So far, the government has approved projects worth Rs 30,000 crore under the scheme in the ongoing financial year 2022-23, the money for which is released in two installments to the states. Therefore, even if funds are approved for transfer for various schemes, the states will not get the money if the Centre’s branding is missing from them.

For instance, if Tamil Nadu uses funds secured through the loan facility for its own scheme to help women self-help groups (SHGs), then it cannot advertise the scheme with only state logos or the picture of its chief minister but will have to use the central government’s branded logos.

“By September, the government will be able to approve projects worth Rs 60,000 crore and hopefully by December, the entire money under the 50-year interest free loans will be disbursed to the states,” the above-mentioned official said.

In 2022-23, the Centre is expected to spend Rs 7.5 lakh crore on capital creation of which Rs 1 lakh crore have been kept aside for states as 50-year interest-free loans for their capital spending.

Eighty per cent of the Rs 1 lakh crore (i.e. Rs 80,000 crore) will be disbursed based on the devolution formula as recommended by the Fifteenth Finance Commission (FFC). The remaining 20 per cent (Rs 20,000 crore) is contingent on the states meeting certain reforms like digitisation of administration.

The FFC had recommended that the Centre devolve 42 per cent of the central taxes to the states from 2021-22 to 2025-26. The vertical devolution (i.e. devolution of central taxes to the states) was to be maintained at 41 per cent to all states along with 1 per cent for the Union Territories of Ladakh and Jammu and Kashmir.

Also Read: Modi govt achieves record capex in April-June despite economic woes but states struggle

Guidelines for availing interest-free loans

In its guidelines released on 6 April for implementing the ‘Special Assistance to States for Capital Investment’ scheme, the Union Finance Ministry’s Department of Expenditure had said states will have to submit details such as name of the project, capital outlay, completion period and its economic justification.

The Finance Ministry had then said that Rs 80,000 crore is reserved for capital works to be undertaken by the states and that the projects under Prime Minister’s Gati Shakti National Master Plan will receive priority.

The allocation included Rs 5,000 crore interest-free loans, which would be provided to incentivise states to undertake privatisation or disinvestment of state public sector firms and monetisation of states’ assets, it had said.

While the Centre had allocated Rs 4,000 crore for implementation of the Pradhan Mantri Gram Sadak Yojana, it had set aside Rs 2,000 crore for digitisation incentive, Rs 6,000 crore for urban reforms and Rs 3,000 crore for capital projects on optical fibre cable.

Launched in 2020-21 in the wake of the Covid pandemic, the Special Assistance to States for Capital Investment released interest-free loans worth Rs 11,830.3 crore in its inception year. Another Rs 14,185.8 crore was transferred to the states in 2021-22.

(This is an updated version of the copy.)

(Edited by Tony Rai)

Also Read: Modi govt raises alarm over off-budget loans of states, wants them to come clean


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