The Scheme for Special Assistance to States for Capital Investment (SASCI) is a central government initiative providing 50-year interest-free loans to state governments to boost Capital Expenditure (Capex). Managed by the Department of Expenditure, Ministry of Finance, it was first launched in FY 2020-21 (initially as the Scheme for Special Assistance to States for Capital Expenditure) to stimulate economic recovery following the COVID-19 pandemic.
Key Provisions and Features:
- Nature of Assistance: The assistance is provided as a long-term loan that is over and above the normal borrowing ceiling allowed to states under Article 293(3) of the Constitution.
- Allocation Mechanism: A significant portion (Part-I) is allocated based on the states' share of central taxes as per the 15th Finance Commission award.
- Reform-Linked Incentives: Other parts of the scheme are tied to specific reforms, including Urban Planning Reforms, Vehicle Scrapping Policy, Police Housing, and the construction of Unity Malls to promote One District One Product (ODOP).
- Mandatory Conditions: To avail funds, states must comply with central guidelines on the branding of Centrally Sponsored Schemes (CSS) and integrate state treasuries with the Public Finance Management System (PFMS).
UPSC Significance: Falling under GS Paper II (Federalism) and GS Paper III (Economy and Infrastructure), the scheme is a prime example of Fiscal Federalism. It highlights the "multiplier effect" of capex, where every rupee spent is estimated to generate a higher return in GDP compared to revenue expenditure.
Related Concepts:
- Article 293: Governs borrowing by states; specifically, Article 293(3) requires states to obtain Central consent if they have outstanding central loans.
- PM Gati Shakti: Projects under this master plan receive priority funding.
- Capital vs. Revenue Expenditure: The scheme strictly prohibits using funds for repairs, maintenance, or recurring costs.