The Central government has granted permission to Andhra Pradesh and Madhya Pradesh to borrow additional financial resources to the tune of Rs 4,898 crore following reforms in urban local bodies (ULBs), the Finance Ministry said on Wednesday. The decision was taken after these two states took lead in undertaking reforms at the urban local body level, which would help them to provide better public health and sanitation services to their citizen.
To motivate the states to undertake reforms in various citizen centric sectors, the Ministry of Finance has linked a part of additional borrowing permission granted to the states to completion of reforms.
"Andhra Pradesh and Madhya Pradesh have taken the lead in undertaking the Urban Local Bodies (ULB) reforms," the ministry said.
As per the ministry, these two states have successfully completed the set of reforms in functioning of ULBs, as specified by the Department of Expenditure, Ministry of Finance.
On successfully undertaking the ULBs reforms, Andhra Pradesh and Madhya Pradesh have been granted permission to mobilise additional financial resources to the tune of Rs 4,898 crore through open market borrowings. Out of these, Andhra Pradesh has received permission of Rs 2,525 crore, while Madhya Pradesh has been permitted to mobilise additional Rs 2,373 crore.
Reforms in the urban local bodies and the urban utilities reforms are aimed at financial strengthening of ULBs in the state and to enable them to provide better public health and sanitation services. Economically rejuvenated ULBs will also be able to create good civic infrastructure.
Besides additional borrowing permissions, the states completing three out of the four reforms are entitled to get additional financial assistance under the "Scheme for Financial Assistance to States for Capital Expenditure". The scheme was announced by the Finance Minister on October 12, 2020 as part of Aatma Nirbhar Bharat Package. It is aimed at boosting capital expenditure by the State Governments who are facing difficult financial environment this year due to the shortfall in tax revenue arising from the COVID-19 pandemic. Under the scheme, an amount of Rs 2,000 crore is earmarked to reward the states who undertake the prescribed citizen centric reforms.
Besides the ULBs reforms undertaken by Andhra Pradesh and Madhya Pradesh, 10 states have implemented the 'One Nation One Ration Card' system and 6 States have done the ease of doing business reforms, so far, the ministry said.
To facilitate more states to undertake the reforms and avail additional borrowings and additional assistance for capital expenditure, the Department of Expenditure had recently extended the deadline for completing 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 FinMin said.
By Chitranjan Kumar
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