Finance Ministry Permits Five States To Borrow Rs 16,728 Crore More
The North Block of the Central Secretariat building, which houses the Ministries of Finance and Home Affairs, stands in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Finance Ministry Permits Five States To Borrow Rs 16,728 Crore More

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The Finance Ministry on Sunday said five states, including Tamil Nadu and Telangana, have been permitted to borrow an additional Rs 16,728 crore following completion of stipulated reforms for ease of doing business.

Andhra Pradesh, Karnataka and Madhya Pradesh are the other states which have been permitted to borrow the extra amount.

The government had in May decided to link grant of additional borrowing permission to states with reforms undertaken by them to facilitate ease of doing business. The reforms stipulated in the category include completion of first assessment of district-level business reform action plan.

Besides, elimination of requirements of renewal of registration certificates/approvals/licences obtained by businesses for various activities, at least under certain acts specified by the central government were also part of the reforms.

"Five states have so far completed the stipulated reforms in the Ease of Doing Business. These states have been granted permission to mobilize additional financial resources to the tune of Rs 16,728 crore through open market borrowings," the Ministry said in a statement.

To meet the extra fund requirements of states on account of Covid-19 pandemic, the central government had in May decided to raise the borrowing limit of the states by 2% of their Gross State Domestic Product (GSDP), over and above the 3% set under the Fiscal Responsibility and Budget Management (FRBM) Act.

However, states were required to complete four specific reforms— implementation of 'One Nation, One Ration Card' system, ease of doing business reforms, urban local body/utility reforms and power sector reforms—by Feb. 15 to get the benefits.

Such states would get the facility of additional borrowing equivalent to 0.25% of their 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.

"So far 10 states have implemented the one nation, one ration card system, five states have done ease of doing business reforms, and two states have done local body reforms," the ministry added.

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