Chandigarh, May 27: With the state staring at 30% shortfall in revenue receipts in FY 2020-21, the Council of Ministers on Wednesday gave in-principle approval to a slew of reforms to make Punjab eligible to avail additional borrowing of 1.5% of Gross State Domestic Product (GSDP) amid COVID-19, as mandated by the Government of India.

A committee will be set up committee to ensure proper monitoring of the implementation of the reforms, of which the Administrative Departments will ensure completion within the time frame stipulated by the Centre, since the additional borrowing limit is available only for Financial Year 2020-21.

The Cabinet, at a meeting chaired by Chief Minister Captain Amarinder Singh, also accorded in-principle approval to amend the Punjab Fiscal Responsibility and Budget Management Act, 2003 accordingly. It authorised the Chief Minister to okay the final draft as approved by Legal Remembrance (LR).

A spokesperson of the Chief Minister’s Office pointed out that the Government of India (GoI), vide letter dated May 17, 2020, had decided to permit additional borrowing limit of up to 2% of GSDP by States in FY 2020-21. However, the relaxation in borrowing limits is partly unconditional to the extent of 0.5% only, and partly conditional to the implementation of reforms such as `one nation one ration card’ system, ease of doing business, as well as reforms in the urban local body/utility and power sectors.

The weightage of each reform is 0.25 percent of GSDP, thus totalling 1 percent. The remaining borrowing limit of 1% would be released in two installments of 0.50 percent each – the first in untied form, immediately to all the States, and the second on undertaking at least three of the specified reforms.

Elaborating on the reform measures to be undertaken by various administrative departments, the spokesperson said that the Food & Civil Supplies department would ensure implementation of One Nation One Ration Card System, having weightage of 0.25%, through Aadhar seeding of all the ration cards and beneficiaries in the State, in addition to automation of all the FPSs in the State by December 31, 2020.

The Industries & Commerce department would implement District Level and Licensing Reforms for Ease of Doing Business with weightage of 0.25%. These reforms would include completion of the first assessment of ‘District Level Business Reform Action Plan’ as intimated by Department for Promotion of Industry and Internal Trade (DPIIT), in addition to implementation of computerised central random inspection system, under the Acts as listed by the GoI, by January 31, 2021.

The Local Government department would undertake reforms to strengthen the local bodies, having weightage of 0.25%, by notifying floor rates of property tax in ULBs, in consonance with the prevailing circle rates (i.e. guideline rates for property transactions), as well as floor rates of user charges in respect of the provision of water-supply, drainage and sewerage which reflect current costs/past inflation. It will also put in place a system of periodic increase in floor rates of property tax/ user charges in line with price increases. The cut-off date of these reforms would be January 15, 2021.

The reforms to be undertaken by Power department include reduction in Aggregate Technical & Commercial losses and reduction in the gap between Average Cost of Supply and Average Revenue Realisation (ACS-ARR gap) in the state as per targets, having weightage of each 0.05%. The last date for recommendation to reach Department of Energy (DOE) is January 31, 2021. It will also put in place a scheme for FY 2021-22 for ensuring cash transfer to farmers through DBT in lieu of free electricity (weightage of 0.15%). To become eligible, the state should formulate the DBT scheme and implement it in at least in one district by December 31, 2020.

The spokesperson pointed out that the stringent and proactive approach taken by the state government to check the spread of Covid have meant a loss of revenue and GSDP to the state. As per the initial estimates presented by the Finance Minister to the CoM, the state was expected to have a revenue shortfall of Rs. 21,563 crore, i.e. about 25% of its Total Revenue Receipts (TRR) (BE) of Rs. 88,004 crore, in FY 2020-21. However, with the lockdown extension till May 31, a higher shortfall of about Rs. 26,400 crore, i.e. about 30% of the state’s Total Revenue Receipts (BE), is expected during FY 2020-21. It is further estimated that there would be zero nominal growth of GSDP for the current year, and it is expected to remain at the same level of Rs. 5,74,760 crore (2019-20 RE). This is expected to lead to shortfall of around Rs. 25,578 crore or a 29.26 % dip in TRR.

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