Finance ministry extends deadline for states to implement reforms linked to additional borrowing limits

The finance ministry has extended till February 15, 2021, the deadline for states to implement the ‘citizen-centric’ reforms in order to avail the additional borrowing limit granted by the Centre in May, according to an official statement on Wednesday.

The earlier deadline fell on December 31, this year.

In addition, the states implementing three of the four specified reforms by the mentioned date would be eligible for the additional funds under the Centre's scheme for financial assistance for capital spending by states, the statement said.


So far, 11 states have implemented at least one of the reforms, making them eligible for a portion of the additional borrowing limit of 2% of gross state domestic product (GSDP).

“Extension of the date for completion of reforms is likely to motivate other States also to complete the reform process expeditiously and avail the linked financial benefits,” the ministry said.

As part of the first announcement under the Atma Nirbhar Bharat package, finance minister Nirmala Sitharaman had said states could borrow up to Rs 4.27 lakh crore in excess of their 3% of GSDP limit to meet the added pandemic-related expenses.

From this amount, 0.25% was linked to the implementation of reforms inthe One Nation One Ration Card System (ONORCS), ease of doing business, urban local bodies or utilities and the power sector, each.

Similarly, while the scheme for financial assistance for capex involved Rs 12,000 crore 50-year, interest-free loans to the states, Rs 2,000 crore was linked to the implementation of these reforms.

The twin incentives have pushed the states to implement some of the reforms, the finance ministry said.

The ONORCS has been implemented by nine states, ease of doing business reforms have been implemented by four states and one state completed the urban local body reforms.

These 11 states in total were granted additional borrowings of Rs 40,251 crore.