Fiscal reforms: State's borrowing to be difficult

With more stipulations to adopt several reforms, it seems to be difficult for the State Government to opt for additional market borrowing in midst of the Covid-19 pandemic.

While the State Government has been undertaking several reforms on continuous basis, asking the State during Covid-19 pandemic for adopting more reforms for availing additional credit creates a difficult scenario, officials feel.

The Centre has asked to go for four types of reforms before going for market borrowings at an elevated level. The Union Government has allowed borrowing additional 2.0 per cent of State’s Gross Domestic Product (GSDP).

If the State Government will take up various reforms it will be able to go for an additional Rs 12,000 crore as the State’s GSDP is around Rs 6 lakh crore.

While the Central Government has allowed States to raise Rs 3.2 lakh crore in net market borrowings in the first nine months of the ongoing financial year,  the State Governments are finding it difficult to opt for more reforms at an early date as they are under high stress due to Covid-19 pandemic, officials say.

As per Central orders, the States will be able to raise 50 per cent of the increased net borrowing limit in April-December, with stipulation of undertaking various reforms.

The Union Government providing such cushioning has said, “If there’s a need to borrow more in the first nine months of the current financial year, as is anticipated due to the fallout of Covid-19, the Centre will process requests to increase open market borrowing during the period,” an official notification says.

The Union Government has said that the State Government will have to implement ‘One Nation One Ration Card’ system whose date line is December 31, 2020.

Secondly, the State will have to do Ease of Doing Business (EoDB) comprehensively so that industry and business will have a smooth sail.

While the State Government has taken up the EoDB in various sectors, but more steps are required and those are to be implemented to avail additional market borrowings.

Those are stipulated by the Department of Promotion of Industry and Internal Trade (DPIIT).

While the EoDB has been implemented in State level, the DPIIT has asked for reforms at district level and a Reform Action Plan has to be implemented.

The DPIIT has circulated several lists of certificates for which renewals are not to be insisted upon.

The Centre has also asked for implementation the Centralised Random Inspection System, which is needed to be implemented in a time bound manner.

Major reforms asked is reduction of Aggregate Technical and Commercial (AT and C) loss in power sector.

As power distribution companies (Discoms) are not able to infuse more funds in system improvement, the AT and C loss is continuing and it is a serious problem.

Reforms in urban local bodies (ULBs), including going for elections and electing the people’s representatives, notifying rates of property tax and user charges for various services in ULBs are warranted.

While the State Government is fighting the Covid-19 and facing natural disasters like Amphan, going for reforms at this juncture seems difficult, admits a senior officer.