Punjab approves reforms to avail additional borrowing of 1.5% of GSDP

The additional borrowing would help state tide over the estimated 30 per cent revenue shortfall in 2020-21 fiscal

The Punjab cabinet on Wednesday approved reforms that would help it avail additional borrowing of 1.5 per cent of the gross state domestic product (GSDP) to tide over the estimated 30 per cent revenue shortfall in 2020-21 fiscal.

Punjab Chief Minister Amarinder Singh, who chaired the cabinet meeting, will chair a review meeting on May 30, a day before lockdown 4.0 ends, to decide on the government's future course of action in either lifting restrictions or further extending the lockdown.

In its letters to states sent on May 17, the Centre allowed additional borrowing limit of up to 2 per cent of GSDP by states in 2020-21. However, the relaxation in borrowing limits is unconditional to the extent of 0.5 per cent only, and conditional for the rest on implementation of a set of reforms.

These reforms are 'one-nation-one-ration card’ system, ease of doing business, and reforms in urban local bodies, utility and power sectors.

 

Punjab Chief Minister Amarinder Singh chaired a cabinet meeting on Wednesday that approved amending the Punjab Fiscal Responsibility and Budget Management Act, 2003, to avail the additional borrowing.

The Punjab cabinet approved setting up of a committee for monitoring of the reforms. The weightage given to each reform is 0.25 per cent of the GSDP, totaling one per cent.

The remaining borrowing limit of one per cent would be released in two instalments of 0.5 per cent each - the first in untied form, immediately to all the states, and the second on undertaking at least three of the specified reforms.

A Punjab government spokesperson said the government’s food and civil supplies department would ensure implementation of ‘one nation one ration card’, which has a weightage of .25 per cent, through Aadhar seeding of all the ration cards and beneficiaries in the state.

The industries and commerce department would implement district level and licensing reforms for ‘ease of doing business’ with weightage of 0.25 per cent. These would include the Department for Promotion of Industry and Internal Trade (DPIIT)’s 'district Level business reform action plan' and implementation of “computerised central random inspection system” by January 31, 2021.

The department of local governance would take up reforms to strengthen urban local bodies, which again has a weightage of 0.25 per cent. These reforms would address notifying floor rates of property tax in urban local bodies, rationalised with prevailing circle rates, floor rates of user charges for water-supply, drainage and sewerage and putting in place a system of periodic increase in floor rates of property tax and user charges in line with price increases. The cut-off date of these reforms is January 15, 2021.

The power department is tasked with reduction in aggregate technical and 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. It will also put in place a scheme to ensure cash transfer to farmers through DBT in lieu of free electricity. To become eligible, the state should formulate the DBT scheme and implement it in at least one district by December 31, 2020.

State finance minister Manpreet Badal told the cabinet meeting that the state was expected to have a revenue shortfall of Rs 21,563 crore, about 25 per cent of its total revenue receipts Rs 88,004 crore, in 2020-21 fiscal.

 

However, with the lockdown extension till May 31, a higher shortfall of about Rs 26,400 crore, or about 30 per cent of the state’s total revenue receipts, is expected during the fiscal.

There would also 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 per cent dip in total revenue receipts.

The Punjab government has also decided to converge funds under its various flagship rural programmes. The cabinet approved a ‘rural transformation strategy’ with an allocation of Rs 5655 crore, which will pool funds of MGNREGS, smart village campaign, PM Awas Yojana (rural), as also Finance commission (FC) grants.