Sopping spree to boost state reforms: Centre outlays incentives via Rs 1.5 lakh cr scheme for FY26

New Delhi: The Centre has laid down reform goalposts for states in mining, urban development and planning, electronic enforcement of road safety, and land reforms, promising incentives through the budget capital expenditure scheme on milestones being achieved, said people with knowledge of the matter.

The total outlay under the Special Assistance to States for Capital Investment (SASCI) programme for FY26 is Rs 1.5 lakh crore through 50-year interest free loans, they said.

As much as Rs 5,000 crore has been earmarked for mining reforms. This is tied to putting in place aminor mineral mining policy and operationalising awarded blocks among other measures. Urban planning reforms get a Rs 13,000 crore incentive, continuing the push from recent years.

Focus on Priority Areas

The centre is urging states to undertake policy changes that drive sustainable urbanisation and improve ease of doing business. Under the SASCI scheme for FY26, another Rs 3,000 crore is for reducing road traffic fatalities.

This incentive is linked to halving the number of such deaths on state highways. The SASCI programme was started during the Covid-19 pandemic and has continued since with allocations being significantly ramped up.

Guidelines have been tweaked to ensure states concentrate on the Centre’s priority areas.

Timebound goals

Timebound and focused reforms have been devised to ensure concrete outcomes, said the officials cited above. “

Among other incentives, a state will be eligible to receive Rs 300 crore if it operationalises at least 10% of the major mineral blocks which were successfully auctioned till March 31, 2025,” a senior official told ET.

Delayed operationalising of mineral blocks has been a concern for the Centre. India has offered 450 mineral blocks for bids since the auction regime was introduced in 2015. But less than a fourth of these are operational, largely on account of delayed approvals by state governments.

Some of the incentives such as those for scrapping aging government vehicles are being continued this year as well. Around Rs 2,000 crore will be available to state governments on a first-come-first-served basis after meeting targets.

A key reform being given a renewed thrust is the implementation of electronic enforcement of road safety. Official estimates cite traffic violations for over 80% of the fatalities caused due to road accidents.

“Currently, traffic enforcement has limitations of human dependency. There is a need for technology-driven traffic enforcement solutions,” said another official, citing the Rs 3,000 crore incentive.

Three categories

States have been grouped in three categories with Maharashtra, Tamil Nadu, and Uttar Pradesh being eligible for the most incentives since they have higher road traffic fatalities on state highways.

These states will have to install electronic enforcement devices on identified high-risk and highdensity corridors. These incentives will also be linked to efficiency of disposal of e-challans.

The Centre is also continuing its boost for land reforms across the country. The reform milestones include modernisation and digitisation of land records to ensure rural records are updated and integrated with various government schemes and banks.

These sops are part of the Rs 13,000 crore allocation within SASCI. Emphasis is also being laid on the need for strengthening municipal governance by filling up sanctioned posts and creating new ones wherever needed. Another Rs 6,000 crore is for states to develop digital public infrastructure for agriculture, among others.