Conditional enhancement of FRBM limit has little to offer

The enhancement is linked to four reform areas

The much sought after increase in the borrowing limits of States announced by the Centre is apparently of no big help to the State.

Union Finance Minister Nirmala Sitharaman said the Central government had conceded the States’ request to enhance the limit under the Fiscal Responsibility and Budget Management Act from 3 to 5%.

The hike in borrowing limit under the FRBM Act follows a series of requests made by Chief Minister K. Chandrasekhar Rao to the Centre.

The enhancement is, however, conditional in that it is linked to four reform areas including universalisation of one nation: one ration card, ease of doing business, power distribution dealing mainly with privatisation and achieving increase in the revenues of the urban local bodies.

According to the Union Finance Minister, 1% of four tranches of 0.25% each with each tranche linked to clearly specified, measurable and feasible reform actions and a further, 0.5% hike if milestones are achieved in at least three out of the four reform areas.

Telangana is ranked at the top in terms of Ease of Doing Business parameters, meeting the condition set by the Centre for availing of 0.25% hike in the borrowing limit.

The announcement that there will be unconditional increase of 0.5% in the FRBM limit from 3 to 3.5% would also be of little use to the State as it had been availing the benefit for few years now. However, reforms like privatisation of power distribution for instance are unlikely as Telangana is the only State in the country supplying 24x7 free power to farmers.

“There is no thinking on the lines of privatising distribution as doubts persist over the efficient implementation of free power in the event of handing over the scheme to private players,” a senior official told The Hindu.

In announcing the conditional enhancement of FRBM limits, senior officials said the Centre had also not taken into consideration the recommendations made by the expert committee headed by N.K. Singh constituted to review the FRBM Act. The committee in its report extensively covered about the Escape Clauses that had to be implemented in the event of unprecedented/exceptional situations related to national security or natural calamities like the coronavirus pandemic.

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Printable version | Jun 5, 2020 4:18:19 PM | https://www.thehindu.com/news/cities/Hyderabad/conditional-enhancement-of-frbm-limit-has-little-to-offer-to-state/article31610160.ece

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