Madhya Pradesh, Andhra Pradesh takes lead in local body reforms, get additional borrowing

Andhra Pradesh and Madhya Pradesh have taken the lead in undertaking the Urban Local Bodies (ULB) reforms as specified by the Union Finance Ministry for allowing states additional borrowing under a special dispensation.

To motivate the states to undertake reforms in various citizen centric sectors, the ministry has linked a part of additional borrowing permission granted to the States to completion of reforms.

In view of the resource requirement to meet the challenges posed by the Covid-19 pandemic, the Centre had on May 17, 2020 enhanced the borrowing limit of the states by two per cent of their Gross States Domestic Product (GSDP).

Half of this special dispensation was linked to undertaking citizen centric reforms by the states. The states get permission to raise additional funds equivalent to 0.25 per cent of GSDP on the completion of reforms in each sector. The four citizen centric areas identified for reforms were -- Implementation of One Nation One Ration Card System, Ease of doing business reform, Urban Local body/utility reforms and Power Sector reforms.

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, a finance ministry statement said.

Out of these, Andhra Pradesh has received permission of Rs 2,525 crore, while Madhya Pradesh has been permitted to mobilize 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.

Madhya Pradesh has come up with "the Madhya Pradesh Nagarpalik Vidhi (Dwitiya Sanshodhan) Adhyadesh, 2020 to implement the reforms and Andhra Pradesh has also issued an the Ordinance to amend the Municipal corporation Act, 1995, the Andhra Pradesh Municipalities Act, 1965, the Visakhapatnam Municipal Corporation Act, 1979, the Vijayawada Muncipal Corporation Act, 1981 and the Andhra Pradesh Municipal Corporations Act, 1994 to effect the reforms.

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 the Aatmanirbhar Bharat Package. It is aimed at boosting capital expenditure by the state governments who are facing a 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 six states have made the ease of doing business reforms, so far.

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 the states to complete citizen centric reforms in various sectors. Now, if the recommendation from the nodal ministry concerned regarding the implementation of the reform is received by February 15, 2021, the state will be eligible for reform linked benefits.

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