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The Centre has added a fiscal-discipline filter to part of its state capex loan window, while retaining the larger 50-year interest-free support framework.
The Union government has changed the design of its Special Assistance to States for Capital Investment, or SASCI, for FY27. A part of the scheme is now linked to fiscal discipline, a first in this loan window.
The move was communicated to states through a Department of Expenditure letter dated 2 April 2026, as reported by The Economic Times on 7 April 2026. Under SASCI, states continue to get 50-year interest-free loans for capital expenditure, but the Centre is now using a slice of the allocation to reward cleaner fiscal reporting and tighter debt management.
The total FY27 outlay under SASCI stands at ₹2 lakh crore, up from ₹1.5 lakh crore in FY26, according to a Rajya Sabha reply answered on 3 February 2026. Out of the FY27 allocation, modalities have been finalised for ₹1.75 lakh crore. The Economic Times reported that ₹75,000 crore will be untied, ₹25,000 crore is reserved for 9 hill states, ₹25,000 crore is linked to capex targets, and ₹3,000 crore has been set aside as a fiscal-discipline incentive for the current year.
Before that, the Centre has also built in release conditions. ET said 66% of the untied amount will be released upfront, while the remaining 34% will be released only after 75% utilisation. Another ₹5,000 crore within the untied window is meant for digital infrastructure, tourist spots, working women hostels, unity malls and libraries.
The wider backdrop is also clear. In a PIB release posted on 1 February 2026, Finance Minister Nirmala Sitharamansaid the Centre’s fiscal deficit is estimated at 4.3% of GDP in BE 2026-27, after 4.4% in RE 2025-26, while the debt-to-GDP ratio is projected at 50±1% by 2030-31.
SASCI has grown quickly since its launch. A LoansJagat report published on 21 August 2025 said the scheme started in FY21 with ₹12,000 crore, expanded to ₹1.49 lakh crore by FY25, and capex loan disbursals had crossed ₹40,000 crore. That report also noted the FY26 Budget allocation at ₹1.5 lakh crore.
A Lok Sabha reply uploaded on 11 February 2026 said SASCI loans are over and above the state borrowing ceiling. Separately, the Finance Ministry’s year-ender release dated 8 January 2026 said the normal net borrowing ceiling for states in FY26 was fixed at 3% of GSDP, with an additional 0.5% of GSDP linked to power-sector performance.
That makes the FY27 tweak less abrupt than it appears. The Centre has been moving from broad capex support to conditional support for some time.
Sitharaman said on 1 February 2026 that the government has delivered on fiscal commitments without compromising on social needs. ET also quoted a senior official saying the ₹3,000 crore fiscal-discipline incentive has been kept for the current fiscal and may be increased later.
The scheme still gives states cheap long-term capex money. But a part of that support is now tied to fiscal behaviour, not just project spending.
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