Finance Ministry extends deadline for states to implement reforms to avail additional borrowing

To meet the extra fund requirements of states on account of COVID-19 pandemic, the Centre in May had decided to raise the borrowing limit of the states by 2 percent of their GSDP, over and above the 3 percent limit set under the Fiscal Responsibility and Budget Management (FRBM) Act.

The Finance Ministry has extended the deadline till February 15 for states to implement reforms like one-nation one ration card and those in the power sector to become eligible for additional borrowing in the current fiscal, a release said.

However, states were required to complete four specific reforms -- implementation of one nation one ration card, ease of doing business reform, urban local body/ utility reforms and power sector reforms -- by December 31, 2020, to get the benefits.

Such states would get the facility of additional borrowing equivalent to 0.25 percent of their Gross States Domestic Product (GSDP) for completing each reform. Under this facility, additional borrowing of up to Rs 2.14 lakh crore is available to the states on completion of all the four reforms.

"The Department of Expenditure has extended the deadline for the states to complete citizen centric reforms in various sectors. Now, if the recommendation from the nodal Ministry concerned regarding implementation of the reform is received by February 15, 2021, the state will be eligible for reform-linked benefits," the Finance Ministry said in a statement on Wednesday.

So far nine states have implemented the one nation one ration card system, four states have completed the ease of doing business reforms and one state has done the urban local body/ utility reforms.

"Additional borrowing permission of Rs 40,251 crore has been granted to these states. Extension of the date for completion of reforms is likely to motivate other states also to complete the reform process expeditiously and avail the linked financial benefits," the ministry added.