The Centre has urged states to speed up spending and submit utilisation certificates after only about ₹51,000 crore of the ₹2 lakh crore interest-free capital loan allocation had been released by 1 October.
The Department of Expenditure has told states to accelerate spending under the Centre’s ₹2 lakh crore interest-free capital loans programme, after officials found that utilisation had fallen well short of the amount set aside for the year, according to people familiar with the matter cited by ET. In letters sent in the first week of October, the department flagged delays in the Scheme for Special Assistance to States for Capital Investment, or SASCI, and said some states had not yet drawn available funds or filed utilisation certificates.
The slowdown matters because the scheme is meant to support state-level infrastructure spending and reinforce the Union government’s wider push to lift public investment. ET said the Centre had released about ₹51,000 crore under SASCI as of October 1 and sanctioned loans worth ₹67,000 crore, leaving actual releases at roughly 26% of the annual allocation. A senior official quoted by ET said the budget was “generous”, but added that there had been a marked slowdown after July.
Previous reporting by Economic Times and other outlets has shown that the scheme has already had a measurable effect on state investment. State capital expenditure rose to 2.7% of gross domestic product in 2024-25 from 2.2% in 2021-22, although the benefits have not been evenly spread. Madhya Pradesh, Maharashtra and Rajasthan have drawn heavily on the loans, while Kerala and Telangana have lagged, a pattern analysts have linked to fiscal stress and structural differences across states.
The Centre has also been tightening the scheme’s design to push states towards more targeted outcomes. Mint reported that the Department of Expenditure has told states and Union territories to focus their capital spending proposals for FY27 on no more than five priority sectors, reflecting a shift from broad encouragement of higher investment to a more selective approach aimed at delivering visible development gains. Business Standard also reported earlier this year that the government had begun tying part of the capital support to states’ investment targets, with possible deductions later if they miss those benchmarks. The latest push suggests officials are now as concerned with how quickly money is used as with how much is approved.
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