Telangana Becomes Third State To Complete Urban Local Bodies Reforms; Gets Additional Borrowing Permission

Telangana has become the third state in the country to successfully undertake “Urban Local Bodies (ULB)” reform stipulated by the Ministry of Finance, an official release said on Thursday (7 January).

With the implementation of the ULB reforms, the Finance Ministry has granted permission to Telangana to mobilise additional financial resources of Rs 2,508 crore through Open Market Borrowings, the release added.

Telangana has now joined the two other states namely, Andhra Pradesh and Madhya Pradesh, who have completed this reform. On completion of urban local bodies reform, these three states have been granted additional borrowing permission of Rs 7,406 crore, it added.

Reforms in the urban local bodies and the urban utilities reforms are aimed at financial strenghtening of ULBs in the state and to enable them to provide better public health and sanitation services.

The reforms stipulated by the Centre were:

1. The state will notify (a) floor rates of property tax in ULBs which are in consonance with the prevailing circle rates (i.e. guideline rates for property transactions) and (b) floor rates of user charges in respect of the provision of water-supply, drainage and sewerage which reflect current costs/ past inflation.

2. 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 in May last year had 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 four citizen centric areas identified for reforms were (a) Implementation of One Nation One Ration Card System, (b) Ease of doing business reform, (c) Urban Local body/ utility reforms and (d) Power Sector reforms.

The states get permission to raise additional funds equivalent to 0.25 percent of GSDP on completion of reforms in each sector.