Fiscally disciplined states to get priority access to ₹3,000 crore SASCI incentive pool

New Delhi: States that demonstrate stronger fiscal discipline by managing debt prudently, adhering to borrowing schedules and fully disclosing off-budget liabilities will get priority access to a ₹3,000 crore incentive pool under the Centre's Special Assistance for State Capital Investment (SASCI) scheme.

In a first, the finance ministry has introduced a performance-based framework to assess states on debt management, borrowing discipline and fiscal transparency to avail the incentives. The department of expenditure issued a detailed guideline earlier this week, outlining the parameters on which fiscal discipline of states will be measured.

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Debt management will carry the highest weightage at 50%, followed by borrowing discipline at 30% and transparency at 20%, signalling the Centre's push to encourage states to strengthen fiscal governance and improve debt sustainability.

"This is fiscal federalism in action. The scheme offers a tangible incentive to reduce off-budget borrowing, improve debt planning and enhance fiscal governance, which is essential for attracting investment," a senior government official told ET.

Under the framework, states will be required to adopt benchmark issuance strategies for state government securities, undertake debt buybacks or switches, and prepare a medium-term debt strategy (MTDS) in consultation with the Reserve Bank of India (RBI).

The MTDS must be approved by the state cabinet and published by December 15, 2026. States that manage at least 5% of their short-term maturing debt through buybacks or switches will receive full marks under the debt management component.

Under the borrowing discipline parameter, which accounts for 30% of the assessment, states must adhere to quarterly borrowing calendars, with deviations capped at 10%. They must also ensure borrowing in the fourth quarter does not exceed 30% of total annual issuance. Compliance reports must be submitted by January 2027.

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The transparency component requires states to publish monthly data on total liabilities, borrowings, guarantees, off-budget liabilities and sector-wise subsidy payments on the Comptroller and Auditor General's website. States making complete monthly disclosures will secure maximum points.

The guidelines classify states into different categories, with larger states eligible for up to ₹250 crore, mid-sized states up to ₹200 crore, and smaller and northeastern states between ₹100 crore and ₹150 crore.