Budget 2025: States to get more funds for disaster relief via interest-free loan scheme

States will be eligible for additional targeted allocations for disaster-related programmes through a 50-year, interest-free loan scheme, officials aware of the matter told ET.This will provide states substantive fiscal support to rebuild infrastructure and undertake mitigation measures, they said.

The Centre has also proposed an additional `5,000 crore incentive under the scheme to encourage urban planning. A set of guidelines for availing of loans under this window has been circulated to state chief secretaries, the officials said. This follows an assurance by Union finance minister Nirmala Sitharaman to state finance ministers at Friday’s prebudget discussions.

The Scheme for Special Assistance to States for Capital Investment (SASCI) provides financial assistance to states through the 50-year, interest-free loan for capital investment projects.


The total amount available under the scheme is `1.3 lakh crore. States that have faced severe natural disasters in FY25, as confirmed by the Inter-Ministerial Central Team (IMCT) deputed by the Ministry of Home Affairs, will be provided an additional allocation of up to 50% of the amount already provided under Part 1 of the scheme in FY25.

Focus on northeast, hill areas
States that have utilised the first instalment under Part 1 and have availed of the second instalment will be entitled to an additional amount of up to 100% of the original allocation under Part 1 for the Northeast and Hill States and 50% of the original allocation under Part 1 for other states. This facility will be provided on a first-come-first-served basis.

The amount has to be used by the affected states for the reconstruction of infrastructure, preferably in disaster-affected districts, and for projects to mitigate future catastrophes, according to the proposed guidelines.

The new urban planning incentive lists a set of nine policy changes to be undertaken by states to become eligible, including implementation of town planning schemes, land pooling, parking and creative redevelopment of cities among others. On the recommendation of the Ministry of Road Transport & Highways (MORTH), states can also avail of assistance for scrapping vehicles. As per the guidelines, ₹3,000 crore will be available to states under the scheme on a first-come-first-served basis.