Pre-budget meeting: States ask FM for funds under interest free loan scheme, towards disaster relief

This gave people like us an opportunity to share insights, says CM Omar

Jaisalmer: Finance ministers of states demanded an increase in allocation under 50-year interest-free loan scheme, while fiscally stressed states like Punjab and Kerala pitched for a special package and borrowing flexibility, sources said on Friday.
In a pre-budget meeting with Union Finance Minister Nirmala Sitharaman, states have also urged for higher borrowing limits to support fiscal activities, besides additional funds for Jal Jeevan Mission.
Sitharaman in her remarks said that because of healthy macroeconomic environment, buoyancy and efficiency in the tax collections, the funds devolved to the states in the last 45 months (April 2021 to December 2024) under the 15th Finance Commission is more than what was devolved in 60 months under the 14th Finance Commission (2015-20).
"The Union Finance Minister also referred to the Scheme for Special Assistance to States for Capital Investment (SASCI), which was first announced in the Union Budget 2020-21, and acknowledged that it has received a very good response from the states," an official statement said.
The Budget for 2025-26 is slated to be presented in Parliament on February 1, 2025. Finance ministers of all states attended Friday's meeting with Sitharaman here.
Several states demanded an increase in allocation under the 50-year interest-free loan scheme, the sources said, adding they also requested for more flexibility in the SASCI scheme under this category.
Jammu and Kashmir Chief Minister Omar Abdullah, lauded the platform for facilitating important discussions on tax reforms and pre-budget consultations.
Speaking to reporters before meeting, Abdullah highlighted the significance of the GST Council’s work, describing it as a valuable opportunity for stakeholders.
“This gave people like us an opportunity to share insights. It’s a constructive process that benefits everyone,” Omar said.
West Bengal Finance Minister Chandrima Bhattacharya said the Union finance minister has said that funds would be allotted to all states towards disaster mitigation.
Bhattacharya requested 50 per cent of the 50-year interest-free loans be tied to disaster management in order to mitigate states that face natural disasters frequently.
West Bengal also demanded a special package and a debt package to help it get over the financial stress.
In the Budget for 2024-25, Sitharaman had increased allocations for interest-free loans to states for capital expenditure, enabling states to spend more on infrastructure and specified reforms. The allocation was increased to Rs 1.5 lakh crore from Rs 1.10 lakh crore disbursed in 2023-24.
Punjab Finance Minister Harpal Singh Cheema said that he demanded an incentive package be given to states which share borders with neighbouring countries.
Maharashtra wanted funds for the Mukhyamantri Majhi Ladki Bahin Yojana and demanded that a Centrally Sponsored Scheme (CSS) be launched with the Centre and state sharing 50 per cent of the cost each.
With regard to road and rail infrastructure, the sources said, states highlighted the need for state-specific road development projects and railway projects.
Telangana Deputy Chief Minister Mallu Bhatti Vikramarka said the Centre should give flexibility to states to use CSS funds and not insist on branding.
He also demanded that the Andhra Pradesh Bifurcation Act be implemented fully so that Telangana gets all its rights under the legislation.
On GST rate rejig, "Taxation system should be more flexible and not be a burden in people. We will present our views tomorrow", Vikramarka said.
Goa Chief Minister Pramod Sawant said the state has sought more funds towards disaster management and rail connectivity. The state also demanded an additional Vande Bharat Express train.
States also sought an increase in the honorarium being paid to Accredited Social Health Activists (ASHA) workers.
Some states asked the central government to bear a larger share of land acquisition costs for projects, the sources added.
Fiscally stressed states like Punjab and Kerala sought special financial packages. Their demands included more loans, grants, and borrowing flexibility.
Sources further said states emphasised the need for additional funding for disaster relief and pressed for more allocation for the State Disaster Response Fund (SDRF).
Kerala Finance Minister K N Balagopal in his speech said that the state sought Rs 24,000 crore special package to tide over its liquidity stress as well as Rs 2,000 crore for relief works at Wayand, which was devastated by landslides earlier this year.
Asserting that fiscal consolidation targets should not compromise sustainable growth, Balagopal also said state governments are facing significant challenges in financing growth and development as their fiscal powers continue to erode.
"The immature implementation of GST, cessation of GST compensation and RD grants, conditions attached to the centrally sponsored schemes, newer restrictions in borrowing, reduction in the inter se share from the divisible pool etc. are major concerns to the fiscal space of the state governments, especially Kerala," Balagopal said.