Major relief for states: FinMin allows five states to borrow more after successful ration card reforms

The Department of Expenditure today allowed five Indian states to borrow more amid the ongoing financial crisis as they have successfully met the reform condition of implementation of One Nation One Ration Card System. Andhra Pradesh, Telangana, Goa, Karnataka, and Tripura have been granted permission to raise additional financial resources of Rs 9,913 crore through Open Market Borrowings (OMBs), said a statement by the Ministry of Finance. It is to be noted that earlier in the month of May, the Centre had allowed additional borrowing limit of up to 2 per cent of Gross State Domestic Product to the States for the current fiscal year 2020-21. However, one per cent of this was subject to the implementation of specific state-level reforms.

The government asked the states to bring reforms in implementation of One Nation One Ration Card System; ease of doing business; urban Local body or utility reforms; and power sector. Due to the reforms in implementation of One Nation One Ration Card System, Andhra Pradesh is now allowed to borrow Rs 2,525 crore, Telangana may borrow Rs.2,508 crore, Karnataka Rs.4,509 crore, Goa Rs 223 crore, and Tripura may borrow Rs 148 crore amid the unprecedented COVID-19 pandemic.

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The central government’s announcement of allowing additional borrowings said that the remaining additional borrowing limit of 1 per cent was to be released in two instalments of 0.50 per cent each. First was to be immediately released to all the states as untied and the second on undertaking at least 3 out of the above-mentioned reforms. Meanwhile, the centre and the states are struggling to raise funds to offset the increased expenditure to support lives and livelihoods amid the crisis caused due to the pandemic. Earlier, the borrowing limit of states was raised from 3 per cent to 5 per cent.