The Punjab Cabinet on Wednesday gave in-principle approval to several reforms in the wake of fears that Punjab would get a 30% reduction in revenue received by the state in the year 2020-21. Under this, Punjab has been made eligible to take additional loan of 1.5% of the total state domestic product (GSDP), which has been set by the Government of India during the Covid crisis. A committee will be formed to oversee the implementation of these reforms as the additional debt limit is available only for the financial year 2020-21.

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The cabinet has given in-principle approval to make necessary amendments in Punjab Financial Responsibility and Budget Management Act-2003. The Cabinet has authorized the Chief Minister to stamp on the final draft approved by the Legal Advisor.

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In his statement, the Chief Minister's Office spokesman said that as per the May 7, 2020 letter of the Government of India, more than 2% of GSDP has been allowed by the states in the fiscal year 2020-21. However, the debt limit has been unconditionally relaxed by only 0.5%. The additional debt limit has been given partly on the condition of 'one nation, one ration card' system, ease of doing business as well as implementing reforms in urban local unit / consumer and energy sectors. Similarly, the share of each reform will be 0.25% of GSDP and thus the total will be 1%. The rest of the one percent borrowing limit will be released in two installments of 0.50% each. The first installment will be released in the open form to all the states immediately while the second will be released for at least three of the prescribed reforms.

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