The Ministry of Finance allows five states to borrow an additional Rs 16,728 crore.

On Sunday, the Ministry of Finance said five states, including Tamil Nadu and Telangana, were allowed to borrow an additional Rs 16,728 crore after the completion of the stipulated ‘Ease of Doing Business’ reforms. 

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

In May, the government agreed to align the granting of additional borrowing permits to states with reforms implemented to make it easier to do business.

The reforms set out in the category include the completion of the first assessment of the ‘District Level Market Improvement Action Plan.’ 

In addition, the elimination of the requirements for the renewal of registration certificates/approvals/licenses obtained by companies for various activities was also part of the changes, at least in the light of those acts specified by the Center.

The Ministry said in a statement, “These states are allowed to mobilize additional funds of Rs 16,728 crore utilizing open market borrowing,” I am glad that the Ease of Doing Business changes have been implemented by these states.

To meet the extra-fund needs of the Member States on the grounds of the COVID-19 pandemic, the Center agreed in May to increase the borrowing cap of the Member States by 2% of its Gross State Domestic Product (GSDP) over and over the 3% threshold laid down in the Fiscal Responsibility and Budget Control Act (FRBM).

However, states were expected to complete four particular reforms—the introduction of the ‘One Country, One Ration Card’ scheme, the ease of undertaking business reforms, urban local government/utility reforms, and the reform of the power sector—by 15 February 2020 to reap the benefits. 

Those states will be issued with an additional borrowing facility equal to 0.25% of their GSDP to complete each adjustment. Under this facility, the States will be able to borrow up to Rs 2.14 lakh crore until all of the four reforms are completed.


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