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Telangana amends state FRBM Act 2005; accepting govt’s decision to extend borrowing limit to 5% from 3%

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State amends FRBM ActThe Governor of Telangana Dr. Tamilisai Sounderarajan has promulgated an ordinance No.3 of 2020, amending the Telangana Fiscal Responsibility and Budget Management (FRBM) Act-2005 which will enable the State to increase the borrowing limit by 2% to 5% from earlier 3%. With the new Telangana FRBM (Amendment) Act 2020, state government’s additional borrowing limit can go up to Rs 20,000 crore now, without any hassles.

  • With this amendment, the Telangana State government has accepted the recent decision of the Central government to expand the borrowing limit of the States under FRBM Act, 2003 from 3% to 5% of Gross State Domestic Product (GSDP) allowing the States to borrow more as there is fall in state’s revenues due to COVID-19 induced lockdown.
  • As per ordinance, due to the shortfall in the devolution of share of Central taxes, Telangana has been allowed an additional borrowing of Rs 1,435 crore during 2019-20 over and above the normal fiscal deficit limit of 3% as a one-time special dispensation. However, due to the current crisis, the limit needs to be raised in FY20-21 too. 

Background:

Telangana State Chief Minister Kalvakuntla Chandrashekhar Rao had written to Prime Minister Narendra Modi and also mentioned during the virtual conferences with the Chief Ministers requesting the Centre to increase the borrowing limit under the FRBM Act to 5% of the Gross State Domestic Product (GSDP).

  • Following similar requests from several other States, the Centre has increased this borrowing limit on the condition of certain reforms in the State, including Ease of Doing Business.
  • In case the reform is not fulfilled for the power sector, then the State can raise a loan up to 4.5% of GSDP this year.

About Telangana:
Capital– Hyderabad
State Bird– Palapitta (Indian Roller or Blue Jay)
State Animal– Jinka (Deer)
State Tree– Jammi Chettu (Prosopis Cineraria)
State Flower– Tangedu (Tanner’s Cassia)