New Delhi, July 23 -- The Centre is considering a higher allocation for FY26 under its 50-year interest-free capital expenditure loan for states, the Special Assistance to States for Capital Expenditure (SASCE) scheme, following a pickup in fund sanctions early in the current fiscal, two people familiar with the development said. A final decision, along with the size of the increase, is expected after the mid-year review in September-October. The last revision had seen a hike of around 35%. The SASCE scheme, launched in FY21 to stimulate post-pandemic recovery through state-led infrastructure investment, has become a key instrument for boosting public capital expenditure. Allocations have remained unchanged over the last two years at Rs.1.5 lakh crore for both FY25 and FY26, after being increased from Rs.1.1 lakh crore in FY24. However, the pace of utilization this year has been swift. Over Rs.50,000 crore, more than a third of the Rs.1.5 lakh crore earmarked for FY25, is expected to be sanctioned in the first four months of the fiscal (April-July 2025), reflecting strong state-level appetite and faster project rollouts, the people mentioned above said. "The pace of early sanctions and disbursals under SASCE this year has been strong, prompting a rethink on the allocation. A final decision is likely during the mid-year review," said the first person mentioned above, requesting anonymity. While many states typically backload their SASCE borrowings toward the latter half of the year, a concerted push to front-load Capex and drive early momentum has resulted in faster uptake this year, added the person mentioned above. To be sure, finance minister Nirmala Sitharaman has urged states to make full use of the Centre's special assistance to states for capital expenditure (SASCE) scheme to drive economic growth by investing in employment-generating infrastructure and local development. Speaking at a public event in Shillong a fortnight ago, Sitharaman said the SASCE funds come interest-free, with repayment due only after 50 years, and even that could be waived. "The focus is on creating long-term public assets, not short-term handouts," she added. Allocations under the scheme were initially ramped up to Rs.1.5 lakh crore each for FY25 and FY26, from Rs.1.1 lakh crore in FY24. The FY25 outlay was later revised down to Rs.1.25 lakh crore, following slower-than-expected spending in the first half of the year, largely attributed to the election cycle. "With most elections completed and several project pipelines in place, states are moving quickly to tap available funds," said the second person mentioned above, who also spoke under anonymity....