With second set of reforms, AP becomes first State to be eligible for 0.5% additional borrowing

Our Bureaus New Delhi/Hyderabad | Updated on October 02, 2020 Published on October 02, 2020

UP becomes 6th State to be eligible for 0.25% additional borrowing with implementation of PDS reforms

Completing two State-level reforms, Andhra Pradesh has become the first State to be eligible for two tranches of addition borrowing. This means it can borrow 0.5 per cent over and above the standard 3.5 per cent of the Gross State Domestic Product (GSDP), said a statement from the Union Finance Ministry.

Meanwhile, Uttar Pradesh has become the sixth State to successfully undertake the ‘One Nation-One Ration Card’ reform, making itself eligible for additional borrowing of 0.25 per cent over and above 3.5 per cent of GSDP. With this, a total of six States (including Telangana, Karnataka, Goa and Tripura) have been permitted to raise additional resources through open market borrowings (OMB) over and above the limit prescribed under the Fiscal Responsibility and Budget Management (FRBM) Act.

Also read: CII congratulates Andhra Pradesh, Telangana on topping Ease of Doing Business Ranking

The latest move will make an additional ₹7,106 crore available to AP and UP.

In May, the Centre had permitted Statesto go for additional borrowing of up to 2 per cent of their GSDP to mobilise more resources via OMB in FY21. Out of 2 per cent, no condition is attached to 0.5 per cent while 1 per cent is subject to implementation of four specific State-level reforms, where the weightage of each reform is 0.25 per cent of GSDP.


These reforms include implementation of One Nation-One Ration Card system, ease of doing business reforms, urban local body/utility reforms and power sector reforms. If any State is able to undertake any three of the reforms, then it can go for the remaining 0.5 per cent borrowing. With the additional 2 per cent, States can altogether raise over ₹4.27 lakh crore.

Reforms undertaken by AP

Having successfully implemented ease of doing business reforms, Andhra Pradesh can now raise an additional ₹2,525 crore through OMB. Earlier, the State was permitted to borrow another ₹2,525 crore after it completed PDS (public distribution system) reforms.

Ease of doing business is an important indicator of an investment-friendly business climate, said the Finance Ministry statement. Improvement in this regard will enable faster growth of the State economy. Therefore, in order to incentivise the implementation of district level and licensing reforms for ease of doing business, an additional borrowing facility of 0.25 per cent of GSDP has been allowed to States on the recommendation of the Department for Promotion of Industry and Internal Trade (DPIIT).

Also read: Rise in borrowing cap: Will States use additional ₹1.07-lakh crore for direct cash transfer schemes?

The ease of doing business reform envisages the State undertaking all of the prescribed actions. They will complete the first assessment of ‘District Level Business Reform Action Plan’ as intimated by the DPIIT.

Under the norms, the State will eliminate the requirements of renewal of certificates/ approvals/ licences obtained by businesses for various activities from the authorities at the State level as per the list circulated by the DPIIT. Collection of reasonable fees with automatic non-discretionary deemed renewal will also be permissible as reform if done in a transparent, online, non-discretionary and automatic manner.

One Nation-One Ration Card

Having completed PDS reforms, UP can now borrow ₹4,851. This amount will help the State in mobilising additional financial resources required to fight Covid-19, said the Finance Ministry statement. Earlier, Telangana (₹2,508 crore), Karnataka (₹4,509 crore), Goa (₹223 crore) and Tripura (₹148 crore) were permitted for similar borrowing.

Also read: GST compensation: Asking States to borrow isn’t the right solution

The One Nation-One Ration Card system ensures the availability of ration to beneficiaries under the National Food Security Act (NFSA) and other welfare schemes, especially to migrant workers and their families, at any fair price shop across the country, said the statement. It also enables better targeting of beneficiaries, elimination of bogus/ duplicate/ineligible card holders.

The Department of Food and Public Distribution has confirmed that Uttar Pradesh, Andhra Pradesh, Telangana, Goa, Karnataka and Tripura have successfully carried out the PDS reforms and implemented the One Nation-One Ration Card system.

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Published on October 02, 2020
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