Centre may raise allocations under SASCI scheme by 15% in FY27
The government is weighing a 15% hike in its 50-year, interest-free loan scheme for states to sustain public capex momentum, even as disbursements under the ₹1.5 trillion fund remain sluggish.
NEW DELHI: The Centre is likely to raise the allocation for its 50-year, interest-free loan scheme for states – the Special Assistance to States for Capital Investment (SASCI) – by up to 15% in the next financial year, two people aware of the matter said. This is despite only about a third of this year’s ₹1.5 trillion outlay being utilized, they added.
Disbursements under the scheme touched roughly ₹50,000 crore by the end of October, against the annual target of ₹1.5 trillion, the people mentioned above said. The remaining funds are expected to be released in the second half of FY26 as more states complete reform-linked milestones required to access their share.
The central government plans to accelerate disbursements in the coming months to sustain public investment momentum and bolster growth.
“Disbursement has been slow in the first half (of FY26), but several states are close to meeting their commitments," said one of the people mentioned above, speaking on condition of anonymity. “We expect a significant pick-up between November and March." In FY25, the entire revised outlay of ₹1.5 trillion was utilized.
State governments have been increasingly pressing for larger allocations under the SASCI scheme. In September, Punjab’s finance minister Harpal Singh Cheema told Mint that the state had urged the Centre to double its share of funds, citing extensive damage from recent floods.
Several other states have also been severely affected by floods and natural disasters during FY26, disrupting infrastructure and straining state finances. The Centre, meanwhile, is keen to ensure that infrastructure spending remains robust through the rest of the fiscal year.
“The idea is to keep the public capex engine running steadily, even as private investment begins to gather momentum," the person mentioned above added.
Emailed queries to the spokesperson for the ministry of finance did not respond at the time of publishing.
Reform-linked funds
To access a portion of SASCI funds, states must implement reforms across key areas such as citizen services, urban local bodies, power distribution, and asset monetisation. About ₹60,000 crore of this year’s allocation is tied to reform milestones, with disbursements contingent on states meeting those targets. The remaining amount can be drawn without conditions, as long as the funds are used strictly for capital expenditure.
Launched in FY21 with a modest ₹12,000 crore corpus to support states after the pandemic, SASCI has since become a central pillar of India’s public investment push. The allocation expanded from ₹15,000 crore in FY22 to ₹1.07 trillion in FY23, when ₹27,000 crore was linked to reform outcomes such as urban planning and power sector performance.
Bigger push ahead
In FY24, the outlay rose further to ₹1.3 trillion, with ₹30,000 crore tied to outcome-based reforms. The remaining ₹1 trillion was conditional on the funds supplementing, not substituting, states’ own capex efforts.
The government has maintained the ₹1.5 trillion allocation for both FY25 and FY26 but is considering a 10–15% increase for FY27, signalling its continued reliance on infrastructure-led growth.
“The scheme has proven to be one of the most effective tools for nudging states to invest in long-term assets," said the other person cited earlier, who didn’t want to be named. “As fiscal and administrative conditions stabilise, a stronger fund absorption is expected, though the Centre will continue to ensure that the money is used strictly for capital formation," the person added.
Economists said the slow start is expected, as states often take time to align approvals and project readiness with central conditions.
“States are in a wait-and-watch mode, assessing the impact of GST rate rationalisation," said N.R. Bhanumurthy, director of the Madras School of Economics. “We should see a clear pickup in disbursements soon."
Bhanumurthy added that linking a portion of the funds to measurable reforms was a “necessary nudge" to strengthen fiscal discipline and governance at the state level.
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