Govt introduces ₹5,000 crore mining reform incentives for states under SASCI

The Centre has introduced a ₹5,000 crore incentive mechanism for states to undertake mining sector reforms and accelerate production, the government said on Friday.

The incentives, part of the Scheme for Special Assistance to States for Capital Investment (SASCI) for the 2026–27 fiscal year, follow a similar programme rolled out last year.

The ministry said the operational guidelines for the scheme component have been released, marking “a significant step to promote mining sector reforms in the country.”

Under the scheme, financial incentives will be provided to states and Union Territories with legislatures across three key reform areas.

The first component focuses on implementation of mining reforms.

States that complete a set of five reforms — including integrating with a national unified mining portal, setting up pre-auction and coordination committees, publishing annual auction calendars and adopting technology to curb ore grade misclassification — by December 15, 2026, will be eligible for incentives of up to of ₹100 crore.

The programme also incentivises faster auctioning of mineral blocks with pre-approved clearances such as environmental and forest permits.

States will receive ₹20 crore per successfully auctioned major mineral block with pre-embedded clearances during 2026–27, subject to a cap of ₹200 crore per state.

Additional incentives of up to ₹250 crore per state will be provided for operationalising at least 10% of mineral blocks that had been auctioned as of March 31, 2026

The third component rewards performance under the State Mining Readiness Index (SMRI) 2026–27.

The top three states in each of the three categories will receive ₹100 crore, ₹75 crore and ₹50 crore respectively.

“The objective of this scheme component is to facilitate and expedite mine operationalisation, increase mineral production, enhance revenue collection by states and improve overall governance of the mining sector,” the ministry said in a statement.

A recent report by SBI Research indicated that although SASCI has boosted overall capex levels, it has also led to partial “crowding out” of states’ own investments.

“A ₹1 increase in SASCI leads to a decline of roughly ₹0.34 in own-funded capex of states suggesting that states substitute a portion of SASCI for spending they would otherwise have financed themselves,” the report said.

The findings raise questions about the true extent of incremental investment by states, even as headline capital expenditure numbers have improved in recent years.

The report suggests that nearly one-third of central transfers may be offset by reductions in states’ own spending, dampening the overall multiplier effect of public investment.