The Centre’s 50-year interest-free loans for capital expenditure by states more than doubled on year to around Rs 30,000 crore so far in the current financial year, a senior government official said.
The total sanctions stood at Rs 40,000 crooe last week as against the budget estimate of Rs 1.5 lakh crore for all states in FY26.
“We are expecting the capex loan disbursements to states to reach around Rs 75,000 crore by September,” the official told FE.
Of the target of Rs 1.5 lakh crore for FY26, the Centre has already issued guidelines and conditionalities for Rs 1.39 lakh crore so far. It is likely to issue norms soon, possibly linked to ease of doing business parameters, for the balance Rs 11,000 crore such loans.
The Centre has linked two-thirds of capex loans earmarked for FY26 to governance reforms, including building municipal cadres, finance reforms, such as an integrated property tax portal, and urban land and planning reforms. Other conditions include achieving own capex growth and undertaking certain urban and rural infrastructure projects.
The Scheme for Special Assistance to States for Capital Investment (SASCI) has evolved from an initial Rs 12,000 crore in 2020-21 (during Covid-19) to Rs 1,50,000 crore in 2024-25, making the SASCI into a policy lever that incentivises critical reforms across states. Of the Rs 1,49,484 crore capex loans released to the states in FY25, half of that was for reforms or project-linked as outlined in the scheme.
The target for FY26 would also be met, officials said, adding that the states are now well prepared to take advantage of the scheme.
Even though the capex support scheme of the Centre has been running for the six year in a row, the Centre for the first time allocated Rs 6,000 crore as incentive to states for digital public infrastructure for agriculture including farmers registry and digital crop survey. The states would have to adopt digital systems for development and maintenance of the state’s farmers’ registry to the state’s land record system and to digitise and standardise crop enumeration process using the digital crop survey programme.
To encourage efficiency in financial management, an amount of Rs 6,000 crore has been allocated to incentivise the states for onboarding 29 centrally sponsored schemes in the SNA SPARSH platform for the ‘just-in-time’ release of funds mechanism to curb floating of funds. The states would also be required to operationalise Aadhar based direct benefit transfer (DBT) payment mechanism with RBI and NPCI under all DBT schemes.