12 states receive Rs 66,413 cr incentives for reforms in power sector from Centre

New Delhi: Over the last two financial years, 12 states have been allowed to raise financial resources of Rs 66,413 crore by the Centre through additional borrowing permissions for carrying out power sector reforms, said the Ministry of Finance on Wednesday. “The Department of Expenditure, Ministry of Finance, has given a boost to reforms by the states in power sector by providing financial incentives in the form of additional borrowing permissions. This move aims to encourage and support the states in undertaking reforms to enhance the efficiency and performance of the power sector,” said the Finance Ministry.

West Bengal avails highest additional borrowing of Rs 15,263 cr

Among the 12 states that availed additional funds for implementing power sector reforms, West Bengal has received the highest at Rs 15,263 crore, followed by Rajasthan at Rs 11,308 crore, Andhra Pradesh at Rs 9,574 crore and Kerala at Rs 8,323 crore. Tamil Nadu has availed additional borrowing of Rs 7,054 crore, Uttar Pradesh Rs 6,823 crore, Assam Rs 4,359 crore, Odisha Rs 2,725 crore, Sikkim Rs 361 crore, Himachal Pradesh Rs 251 crore, Meghalaya Rs 192 crore and Manipur Rs 180 crore.

In FY24, states can continue to avail Rs 1.43 cr for power sector reforms

In the financial year 2023-24, states can continue to avail themselves of the facility of additional borrowing linked to power sector reforms. An amount of Rs 1,43,332 crore will be available as an incentive to states for undertaking these reforms in 2023-24. States that were unable to complete the reform process in 2021-22 and 2022-23 may also benefit from the additional borrowing earmarked for 2023-24 if they carry out the reforms in the current financial year, said the Finance Ministry.

The primary objectives of granting financial incentives for undertaking power sector reforms are to improve operational and economic efficiency within the sector and promote a sustained increase in paid electricity consumption.

Power sector reforms-linked additional borrowing scheme

The initiative was announced by Union Finance Minister Nirmala Sitharaman in Union Budget 2021-22. Under this initiative, an additional borrowing space of up to 0.5 percent of the Gross State Domestic Product (GSDP) is available to the states annually for a four-year period from 2021-22 to 2024-25. This additional financial window is dependent on implementation of specific reforms in the power sector by the states.

The initiative has spurred state governments to initiate the reform process, and several states have come forward and submitted details of the reforms undertaken and achievements of various parameters to the Ministry of Power. To be eligible for the incentives, State governments must undertake a set of mandatory reforms and meet stipulated performance benchmarks.

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