Rajasthan becomes the 5th State to complete Urban Local Bodies (ULB) reforms

Gets additional borrowing permission of ₹ 2,731 crore

Additional borrowing permission of ₹ 10,212 crore granted so far to 5 States for undertaking ULB reforms

Rajasthan has become the 5^thState in the country to successfully undertake Urban Local Bodies (ULB) reforms stipulated by the Department of Expenditure, Ministry of Finance and has thus become eligible for additional reform linked borrowing. Accordingly, the State has been granted permission by the Department of Expenditure to mobilise additional financial resources of ₹ 2,731crore through Open Market Borrowings.

Rajasthan has joined four other States namely, Andhra Pradesh, Madhya Pradesh, Manipur and Telangana, who have completed ULB reforms. On completion of this set of reforms, these five States have been granted a total additional borrowing permission of ₹ 10,212 crore. State wise amount of the additional borrowing permitted is as under:

Sl.No.	State	Amount (Rs in crore)
1.	Andhra Pradesh	2,525
2.	Madhya Pradesh	2,373
3.	Manipur	75
4.	Rajasthan	2,731
5.	Telangana	2,508

Reforms in ULBs and the urban utilities reforms are aimed at financial strenghtening of ULBs in the States and to enable them to provide better public health and sanitation services to citizens. Economically rejuvenated ULBs will also be able to create good civic infrastructure.

The set of reforms stipulated by the Department of Expenditure to achieve these objectives are:

(i)    The State will notify:

1. Floor rates of property tax in ULBs which are in consonance with the prevailing circle rates (i.e. guideline rates for property transactions) and;
2. Floor rates of user charges in respect of the provision of water-supply, drainage and sewerage which reflect current costs/past inflation.

(ii)   The State will put in place a system of periodic increase in floor rates of property tax/ user charges in line with price increases.

In view of the resource requirement to meet the challenges posed by the COVID-19 pandemic, the Government of India had on 17^th May, 2020 enhanced the borrowing limit of the States by 2 percent 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 percent of GSDP on completion of reforms in each sector. The four citizen centric areas identified for reforms are:

1. Implementation of One Nation One Ration Card System
2. Ease of doing business reform
3. Urban Local body/ utility reforms
4. Power Sector reforms.

Linking mobilization of a part of additional financial resources to reforms has pushed reforms by many States in the four citizen centric areas. So far 11 States have implemented the One Nation One Ration Card System, 8 States have done ease of doing business reforms, 5 States have done local body reforms and 1 State has completed power sector reforms. Total reform linked additional borrowing permission issued so far to the States who have done the refoms stands at Rs.­­­65,493 crore.

Urban local body reform eligibility enables additional borrowing by states upon completing prescribed property tax and user charge measures. States that complete Urban Local Body reforms become eligible to mobilise additional borrowing through market borrowings, subject to notifying floor rates of property tax in consonance with circle rates and floor rates of user charges for water, drainage and sewerage reflecting current costs and past inflation, together with a mechanism for periodic increases in these rates in line with price movements.