Telangana becomes 3rd in India to complete urban local bodies reform; State can raise addt funds

Hyderabad: Telangana has become the third state in the country after Andhra Pradesh and Madhya Pradesh to successfully undertake urban local bodies (ULB) reform stipulated by the Union ministry of finance's department of expenditure. This means that the state has become eligible to mobilise additional financial resources of Rs. 2,508 crores through open market borrowings. Permission for the same was issued by the department of expenditure on 7 December.

On completion of urban local bodies reform, the three states have been granted additional borrowing permission of Rs. 7,406 crores.

Reforms in the urban local bodies and the urban utilities reforms are aimed to financially strengthen ULBs in the state and to enable them to provide better public health and sanitation services. Economically rejuvenated ULBs will also be able to create good civic infrastructure.

Under the new reforms, the state will notify floor rates of property tax in ULBs which are in consonance with the prevailing circle rates (i.e. guideline rates for property transactions) and also the floor rates of user charges in respect of the provision of water supply, drainage, and sewerage which reflect current costs/past inflation. The reform also stipulates that the state will put in place a system of periodic increase in floor rates of property tax and user charges in line with price increases.

In view of the resource required to meet the challenges posed by the COVID-19 pandemic, the Central government had on 17 May enhanced the borrowing limit of the states by two per cent 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 per cent of GSDP on completion of reforms in each sector. The four citizen-centric areas identified for reforms were the implementation of 'One Nation One Ration Card' system, ease of doing business reform, urban local body/utility reforms, and power sector reforms.

So far, 10 states have implemented the 'One Nation One Ration Card' system, seven have done ease of doing business reforms, and three states have completed local body reforms. Total additional borrowing permission issued so far to the states who have implemented the reforms stands at Rs. 54,190 crores.