Latest news with #SASCE
Mint
23-07-2025
- Business
- Mint
Centre likely to raise FY26 capex loan outlay after mid-year review
New Delhi: The Centre is considering a higher allocation for FY26 under its 50-year interest-free capital expenditure loan for states, the Special Assistance to States for Capital Expenditure (SASCE) scheme, following a pickup in fund sanctions early in the current fiscal, two people familiar with the development said. A final decision, along with the size of the increase, is expected after the mid-year review in September–October. The last revision had seen a hike of around 35%. The SASCE scheme, launched in FY21 to stimulate post-pandemic recovery through state-led infrastructure investment, has become a key instrument for boosting public capital expenditure. Allocations have remained unchanged over the last two years at ₹ 1.5 trillion for both FY25 and FY26, after being increased from ₹ 1.1 trillion in FY24. However, the pace of utilization this year has been swift. Over ₹ 50,000 crore, more than a third of the ₹ 1.5 trillion earmarked for FY25, is expected to be sanctioned in the first four months of the fiscal (April–July 2025), reflecting strong state-level appetite and faster project rollouts, the people mentioned above said. 'The pace of early sanctions and disbursals under SASCE this year has been strong, prompting a rethink on the allocation. A final decision is likely during the mid-year review,' said the first person mentioned above, requesting anonymity. While many states typically backload their SASCE borrowings toward the latter half of the year, a concerted push to front-load Capex and drive early momentum has resulted in faster uptake this year, added the person mentioned above. To be sure, Finance Minister Nirmala Sitharaman has urged states to make full use of the Centre's special assistance to states for capital expenditure (SASCE) scheme to drive economic growth by investing in employment-generating infrastructure and local development. Speaking at a public event in Shillong a fortnight ago, Sitharaman said the SASCE funds come interest-free, with repayment due only after 50 years, and even that could be waived. 'The focus is on creating long-term public assets, not short-term handouts,' she added. Meanwhile, allocations under the scheme were initially ramped up to ₹ 1.5 trillion each for FY25 and FY26, from ₹ 1.1 trillion in FY24. However, the FY25 outlay was later revised down to ₹ 1.25 trillion, following slower-than-expected spending in the first half of the year, largely attributed to the election cycle. "With most elections completed and several project pipelines in place, states are moving quickly to tap available funds,' said the second person mentioned above, who also spoke under anonymity. 'If this momentum holds through the second quarter, a significant bump in the FY26 allocation could be seen," the person added. A finance ministry spokesperson did not respond to emailed queries. For FY26, a portion of the ₹ 1.5 trillion earmarked under the SASCE scheme has been tied to governance and reform-linked conditions. These include building on staff strength at the municipal level, implementing integrated property tax platforms, and advancing urban land and planning reforms. States are also expected to demonstrate growth in their own capital expenditure and undertake specified urban and rural infrastructure projects. In previous years, reform milestones included overhauling urban planning frameworks, strengthening municipal finances, expanding housing for police personnel, scrapping old government vehicles, and setting up digital libraries at the panchayat and ward levels for children and young adults. Loans under the SASCE scheme, first introduced in FY21, have played a vital role in stimulating capital spending by states and catalyzing the economy since the pandemic. As things stand, states account for 20–25% of India's total infrastructure spending, a critical priority for the government.
Mint
11-07-2025
- Business
- Mint
Sitharaman urges states to tap Centre's interest-free capex loan scheme to drive growth
New Delhi: Finance minister Nirmala Sitharaman on Friday urged states to make full use of the Centre's special assistance to states for capital expenditure (SASCE) scheme to drive economic growth by investing in employment-generating infrastructure and local development. 'When you build capital assets, employment increases, core sectors benefit, and the multiplier effect is a lot more than just putting money in people's hands,' Sitharaman said while speaking at a public event in Shillong. The minister said the central government aimed to empower states to invest in physical and social infrastructure post-Covid pandemic. '(The nation's) economic recovery is dependent on states' recovery as well,' she added. Introduced in 2020-21 (FY21), the Centre's 50-year interest-free capex loan scheme has been crucial to driving capital spending by states and stimulating the economy post-pandemic. For FY26, the Centre has allocated ₹ 1.5 trillion for these loans, aiming to boost public infrastructure spending and support state-level capital projects. Of the ₹ 1.5 trillion earmarked for FY26, around 60% will be unconditional or linked to infrastructure spending, while the remaining 40% will be tied to reforms that states. Union territories were included under the scheme in FY26. Sitharaman said that these loans to states go beyond the constitutionally mandated transfers under the Finance Commission and reflect Prime Minister Narendra Modi's deeper understanding of states' development challenges. 'These funds come without interest, and repayment is due only after five decades, and even that may be waived. The focus is on creating long-term public assets, not short-term handouts,' the minister said. The Finance Commission of India is a constitutional body established under Article 280 to recommend how the Centre's revenues should be distributed between the Union and the states. It determines the vertical devolution (share of taxes between Centre and states) and horizontal devolution (distribution among states), based on factors such as population, income levels, and fiscal performance. The Centre has significantly increased the scheme's allocation to ₹ 1.5 trillion each for FY25 and FY26, up from ₹ 1.10 trillion in FY24, although the FY25 allocation was revised to ₹ 1.25 trillion due to a slowdown in the first half of the fiscal year, mainly due to elections. On 27 April, Mint reported that states' total outstanding liabilities under the scheme are expected to exceed ₹ 3.5 trillion by end-FY25. Sitharaman highlighted a series of major infrastructure and institutional investments in Meghalaya, funded by the central government, many of them through the capital expenditure scheme. These projects, she said, reflect the government's long-term commitment to the development of the Northeast and are aimed at boosting economic opportunities, connectivity, and access to services in the region. Among the key initiatives is the redevelopment of Umiam Lake, with a central outlay of ₹ 99.99 crore, alongside the creation of a world-class MICE (meetings, incentives, conferences and exhibitions) hub to host large events, including G20-style gatherings.
