Andhra Pradesh and Madhya Pradesh have become the first two states to successfully complete a set of reforms in the functioning of the Urban Local Bodies (ULBs) to be eligible to borrow an extra Rs 4,898 crore in FY21.
Out of these, Andhra Pradesh has received permission of borrowing an additional Rs 2,525 crore, while Madhya Pradesh got the nod for additional Rs 2,373 crore, the union finance ministry said in a statement.
In view of the resource requirement to meet the challenges posed by the Covid-19 pandemic, the Centre had enhanced the borrowing limit of the states by 2% 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% of GSDP on completion of reforms in each sector — implementation of one nation one ration card system, ease of doing business reform, urban local body/utility reforms and power sector reforms.
Reforms in the urban local bodies and the urban utilities reforms are aimed at financially strengthening of ULBs in the state and to enable them to provide better public health and sanitation services.
The reforms stipulated to achieve these objectives are: the states will notify floor rates of property tax in ULBs, which are in consonance with the prevailing circle rates and floor rates of user charges in respect of the provision of water-supply, drainage and sewerage, which reflect current costs/ past inflation.
The states will put in place a system of periodic increase in floor rates of property tax/ user charges in line with price increases.
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 ordinance to amend various municipal acts to effect the 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 done the ease of doing business reforms, so far. If the recommendation from the nodal ministry concerned regarding implementation of the reform is received by February 15, 2021, the state will be eligible for reform linked benefits.