State-wise gaps in SASCI fund utilisation widen as scheme expands: SBI

SBI report highlights widening gaps in SASCI fund utilisation across states, with uneven absorption and signs of substitution as the scheme expands in scale and complexity

The Scheme for Special Assistance to States for Capital Investment (SASCI) is seeing uneven absorption of central capital support across states even as the programme has helped raise states’ capital expenditure from 2.2 per cent of gross domestic product (GDP) in FY22 to 2.7 per cent in FY25, with ₹4.5 trillion disbursed over the past five years, according to a report by State Bank of India (SBI).

 

“State-wise SASCI utilisation shows a clear shift from near-universal high absorption in the initial years to a more uneven pattern in the later phase, suggesting that as the scheme expanded in scale and complexity, execution capacity began to diverge across states,” the report said.

 

 

In FY21, 17 out of 28 states had 100 per cent fund utilisation rates under SASCI, which fell gradually to no states having full utilisation in FY25, according to data from the report. As of FY25, West Bengal had the highest utilisation rate of 96.7 per cent, followed by Maharashtra at 95 per cent and Chhattisgarh at 94.4 per cent. The lowest utilisation rates were in Manipur at 47.4 per cent and Nagaland at 51.7 per cent, the data showed.

 

SASCI is a central government programme launched in October 2020 by the Ministry of Finance to push state-level capital spending at a time when revenues had weakened during the pandemic. It provides 50-year interest-free loans to states, with allocations split between untied funds and components linked to specific reforms and sectors such as urban planning.

 

The SBI report noted that states with higher debt-to-GDP ratios and persistent revenue deficits show lower utilisation, as revenue expenditure crowds out capital spending. States such as Madhya Pradesh, Rajasthan, Maharashtra and Andhra Pradesh have maintained relatively high utilisation, while Punjab, Kerala and Telangana have recorded weaker absorption in recent years, as per the report.

 

The report also stated that ageing states have lower average utilisation (74.5 per cent) compared to intermediate (80.6 per cent) and youthful states (82.9 per cent).

 

Jharkhand, Karnataka and West Bengal are among the top states, with Maharashtra, Andhra Pradesh, Assam and Odisha also running large programmes, said the report, adding that most states having large cash transfers also have high SASCI utilisation rates. “One reason for this could be substitutability of state own capital expenditure with SASCI,” it noted.

 

For every ₹1 increase in SASCI, total capital expenditure rises by ₹0.67, while states’ own capital expenditure declines by about ₹0.34, suggesting that states substitute a portion of SASCI for spending they would otherwise have financed themselves, according to the report.

 

The report showed that the design of SASCI affects outcomes, with tied funds that are largely linked to sectors such as urban planning translating more effectively into capital expenditure. A ₹1 increase in tied SASCI is associated with a ₹0.87 rise in total capex, compared to ₹0.26 for untied funds. Tied support shows limited substitution by states, while untied funds are more fungible and linked to a decline in states’ own capital spending, it noted.

 

Under SASCI, funds are divided into “untied” and “tied” components. Untied funds are provided without strict spending conditions, allowing states flexibility in how they deploy the money for capital expenditure. In contrast, tied funds are incentive-linked and released against progress on specific reforms and sectors such as urban planning, land reforms and agriculture, with compliance milestones attached.

 

The Centre has continued SASCI in 2026–27 with an outlay of ₹2 trillion, according to Ministry of Finance guidelines dated March 27, 2026. Of this, ₹750 billion has been earmarked as untied support to states and Union Territories, while the remaining allocation is largely tied to specific reforms and sectors, along with a portion set aside to support states’ share in central infrastructure projects such as railways, roads and water schemes, as per the guidelines.