The Union Ministry of Finance informed Parliament that Andhra Pradesh received ₹19,619 crore under the Scheme for Special Assistance to States for Capital Investment (SASCI) in the past two and a half years. Responding to a question by MP P.V. Midhun Reddy, Finance Minister Nirmala Sitharaman stated that total funds released to the state under SASCI since 2020–21 reached ₹31,005.47 crore. The recent allocation is 72% higher than the ₹11,386 crore sanctioned during 2020–2024. The SASCI scheme provides 50-year interest-free loans to boost state capital expenditure and infrastructure development.
The Union Ministry of Finance informed the Lok Sabha that Andhra Pradesh secured ₹19,619 crore under the 'Special Assistance to States for Capital Investment' (SASCI) scheme over two and a half years. Union Finance Minister Nirmala Sitharaman provided these figures in a written response to YSRCP MP P.V. Midhun Reddy. This funding reflects a 72% surge compared to the ₹11,386 crore received by the previous state administration between 2020 and 2024.
The announcement was made in the Lok Sabha in New Delhi on August 4, 2026. The data covers financial releases to Andhra Pradesh from FY 2020–21 up to August 1, 2026. The funds are being utilized across urban, rural, and regional capital projects in Andhra Pradesh, including infrastructure developments in Amaravati.
The mechanism of the SASCI financial assistance involves structured steps:
1. Budgetary Allocation: Union Government sets aside a central pool (₹1.30 lakh crore in Budget 2024–25).
2. Formula & Reform Allocation: Part of the allocation is based on the 15th Finance Commission share, while part is reform-linked.
3. Project Proposal Submission: State governments prepare detailed capital expenditure proposals aligned with guidelines.
4. Approval & Disbursement: Department of Expenditure reviews and releases 50-year interest-free long-term loans.
The initiative began in FY 2020–21 as the 'Scheme for Special Assistance to States for Capital Expenditure' during the COVID-19 pandemic to offset economic contraction. It was later renamed and expanded into the 'Scheme for Special Assistance to States for Capital Investment' (SASCI) in FY 2022–23. The financial outlay grew from ₹12,000 crore in 2020–21 to ₹1.30 lakh crore in FY 2024–25.
1. FY 2020–21 Launch: Initial capital expenditure scheme provided ₹11,830 crore to various states, with AP getting ₹688 crore.
2. FY 2022–23 Expansion: Scheme expanded to ₹1 lakh crore; AP received ₹6,105 crore.
3. FY 2024–25 Interim Budget: Union Minister extended SASCI with ₹1.30 lakh crore allocation, adding ₹75,000 crore reform-linked component.
While federal nations like the USA provide conditional block grants to states, India's SASCI framework provides 50-year zero-interest debt, making it one of the longest sovereign soft loan windows globally for sub-national entities.
Core Concept: Special Assistance to States for Capital Investment (SASCI)
Q1. What is the tenure of financial assistance loans provided to state governments under the SASCI scheme? [Easy]
A) 10 years
B) 25 years
C) 50 years
D) 75 years
Answer: C
Explanation: Loans under the Scheme for Special Assistance to States for Capital Investment (SASCI) are provided for a 50-year duration.
Q2. Which Union Ministry administers the Scheme for Special Assistance to States for Capital Investment (SASCI)? [Easy]
A) Ministry of Home Affairs
B) Ministry of Finance
C) Ministry of Commerce and Industry
D) Ministry of Statistics and Programme Implementation
Answer: B
Explanation: SASCI is administered by the Department of Expenditure under the Union Ministry of Finance.
Q3. How much total loan assistance did Andhra Pradesh receive under the SASCI scheme from FY 2020–21 to August 2026? [Moderate]
A) ₹11,386.00 crore
B) ₹19,619.00 crore
C) ₹31,005.47 crore
D) ₹45,120.50 crore
Answer: C
Explanation: The Centre informed Lok Sabha that Andhra Pradesh received a total of ₹31,005.47 crore under SASCI since FY 2020–21.
Q4. Under the SASCI scheme guidelines, what rate of interest is charged on loans extended to state governments? [Moderate]
A) Repo rate linked variable interest
B) 0% (Interest-free)
C) 3% fixed interest
D) 5% concessional interest
Answer: B
Explanation: SASCI provides 50-year completely interest-free (0%) capital loans to states.
Q5. Which of the following components forms part of the basic allocation criterion for unlinked SASCI funds among states? [Moderate]
A) Equal division among all 28 states
B) State share of central taxes per 15th Finance Commission
C) State Gross Domestic Product (GSDP) ranking
D) Total geographical area of the state
Answer: B
Explanation: Basic allocation under SASCI is distributed among states in proportion to their share of central taxes and duties as per the 15th Finance Commission award.
Q6. Statement I: SASCI funds can be utilized by states for meeting revenue expenditure, such as salary payments.
Statement II: Capital investment spending generates high economic multiplier effects compared to revenue spending. [Tricky]
A) Both Statement I and Statement II are correct
B) Both Statement I and Statement II are incorrect
C) Statement I is correct but Statement II is incorrect
D) Statement I is incorrect but Statement II is correct
Answer: D
Explanation: Statement I is incorrect because SASCI funds are strictly reserved for capital expenditure; Statement II is correct as capital spending yields higher GDP multiplier effects.
Q7. What was the national budgetary allocation announced for the SASCI scheme in the Interim Union Budget 2024–25? [Tricky]
A) ₹50,000 crore
B) ₹1,00,000 crore
C) ₹1,30,000 crore
D) ₹2,00,000 crore
Answer: C
Explanation: The Union Budget 2024–25 announced an overall allocation of ₹1.30 lakh crore for the SASCI scheme.
Q8. Which constitutional provision grants the Union Government the authority to give loans to State Governments? [Tricky]
A) Article 280
B) Article 293(2)
C) Article 300A
D) Article 356
Answer: B
Explanation: Article 293(2) of the Constitution empowers the Government of India to make loans to states subject to terms set by Parliament.
PYQ 1:
With reference to central financial assistance to states in India, the 'Scheme for Special Assistance to States for Capital Investment' provides:
A) Grants-in-aid that do not require repayment
B) 50-year interest-free loans for capital expenditure
C) Short-term ways and means advances for revenue deficits
D) Subsidized commercial bank loan guarantees
Answer: B
Explanation: SASCI explicitly provides long-term 50-year interest-free loans dedicated to capital creation.
PYQ 2:
Consider the following statements regarding the SASCI scheme:
1. It was originally launched during the FY 2020–21 financial year.
2. The loan assistance provided under this scheme adds to the annual FRBM borrowing limits of state governments.
3. Part of the scheme's allocation is tied to state-level reform milestones.
Which of the above statements are correct?
A) 1 and 2 only
B) 1 and 3 only
C) 2 and 3 only
D) 1, 2, and 3
Answer: B
Explanation: Statements 1 and 3 are correct. Statement 2 is incorrect because SASCI financial assistance is over and above the normal borrowing ceiling permitted to states under FRBM limits.
PYQ 3:
Match List-I (Term/Article) with List-II (Description/Provision):
List-I:
a) Article 293(2) b) Capital Expenditure c) SASCI Reform Component d) 15th Finance Commission
List-II:
1. Creation of physical assets like roads and ports
2. Central loans to State governments
3. Basis for state-wise basic tax devolution share
4. Milestone-linked financial release
Select the correct answer using the code given below:
A) a-2, b-1, c-4, d-3
B) a-1, b-2, c-3, d-4
C) a-2, b-4, c-1, d-3
D) a-3, b-1, c-4, d-2
Answer: A
Explanation: Article 293(2) covers Central loans, CapEx covers asset creation, SASCI reform component involves milestone-linked release, and 15th Finance Commission provides tax devolution shares.
PYQ 1:
Question 1 (150 words): Explain the objective of the Scheme for Special Assistance to States for Capital Investment (SASCI) and analyze its significance in boosting sub-national infrastructure creation.
The Scheme for Special Assistance to States for Capital Investment (SASCI) is a key fiscal initiative launched by the Union Finance Ministry in FY 2020–21 to provide 50-year interest-free soft loans to state governments. Its primary objective is to boost state-level capital expenditure (CapEx) without worsening their immediate debt servicing burdens.
SASCI is highly significant for sub-national infrastructure because state governments historically face fiscal stress due to high committed revenue expenditures. By offering long-term zero-interest funding, SASCI enables states like Andhra Pradesh—which secured ₹19,619 crore over two and a half years—to undertake crucial long-gestation projects in roads, urban development, and irrigation.
Furthermore, by tying ₹75,000 crore of its ₹1.30 lakh crore allocation (2024–25) to milestone-linked reforms, SASCI incentivizes states to adopt citizen-centric policy improvements. Sustaining SASCI is essential to maintaining strong physical asset formation across Indian states.
Question 2 (250 words): Evaluate the role of central capital assistance schemes in strengthening fiscal federalism in India while ensuring macroeconomic stability and capital asset formation.
Fiscal federalism in India is characterized by vertical financial imbalances, where the Union holds greater revenue-raising powers while State governments shoulder major social and economic development responsibilities. Central capital assistance initiatives, most notably the Scheme for Special Assistance to States for Capital Investment (SASCI), serve as crucial fiscal bridge mechanisms.
From a capital asset creation perspective, SASCI addresses state financial bottlenecks. Since its inception in FY 2020–21, SASCI has expanded to an annual outlay of ₹1.30 lakh crore. States receive 50-year interest-free loans, which do not distort their immediate budget balances. For example, Andhra Pradesh's receipt of ₹31,005.47 crore total SASCI assistance since 2020–21 demonstrates how soft central financing sustains regional capital expenditure.
Regarding fiscal federalism, SASCI operates through dual channels. A major portion is allocated based on the 15th Finance Commission tax devolution formula, upholding horizontal equity among states. Simultaneously, reform-linked tranches incentivize state structural reforms in land regulation, urban governance, and power sector efficiency.
However, challenges remain. High reliance on central capital transfers can create fiscal dependence, and delayed project submission by states can retard funds flow. Additionally, strict reform conditions must balance central objectives with state administrative autonomy.
To maximize impact, the Centre should maintain predictable multi-year SASCI windows while states strengthen project preparation capabilities. Harmonizing central financial support with state developmental autonomy is key to achieving sustainable long-term economic growth.