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Five states allowed to borrow Rs 9,913 crore on meeting reform targets

BusinessToday.In     September 24, 2020

Centre has allowed five states to raise additional funds to the tune of Rs 9,913 crore through open market borrowings (OMB). The Department of Expenditure has allowed Andhra Pradesh, Telangana, Goa, Karnataka and Tripura to procure financial resources after they "successfully met the reform condition of implementation of One Nation One Ration Card System," Ministry of Finance said in a statement on Thursday.

Out of these five states, Andhra Pradesh has been allowed to borrow Rs 2,525 crore, Telangana Rs 2,508 crore, Karnataka Rs 4,509 crore, Goa Rs 223 crore, and Tripura Rs 148 crore.

ALSO READ: Assess impact of localised lockdowns; need to learn from best practices: PM Modi to states

Back in May, Centre had allowed states to additionally borrow up to 2 per cent of their respective Gross State Domestic Product (GSDP) for the year 2020-21 on account of the COVID-19 pandemic. This made available funds worth Rs 4.27 lakh crore to the states. However, the central government had specified certain prerequisites before states could access these funds.

The states have to implement four reforms including One Nation One Ration Card system, ease of doing business reform, urban local body and utility reforms, and power sector reforms to receive one per cent of the additional borrowing limit. Each of these reforms holds a weightage of 0.25 per cent.

ALSO READ: GST compensation: 21 states go for Option 1 borrowing plan

The remaining one per cent was to be released in two instalments of 0.50 per cent each - first immediately to all the States as untied, and the second on completing at least three out of the four abovementioned reforms. Centre has already granted permission to states to raise the first 0.50 per cent as OMB in June 2020. This made an additional amount of Rs 1.07 lakh crore available to the states.

States across the board are braving fund crunch as the coronavirus pandemic and subsequent lockdowns have marred economic activities and earnings. Delay on Centre's part in GST compensation to states has exacerbated their financial woes.

ALSO READ: GST Council to take final decision on compensation payout to states: Sitharaman


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