Power sector reforms: Govt grants additional borrowing of Rs 7,309 cr to AP, Rajasthan

  • While Rajasthan has been allowed to borrow an additional Rs 5,186 crore, Andhra Pradesh has been allowed to borrow additional Rs 2,123 crore
  • Nine other states have also submitted their proposals to the Ministry of Power to seek additional borrowing from the Centre

New Delhi: The Central government has granted additional borrowing of Rs 7,309 crore to two states — Andhra Pradesh (AP) and Rajasthan — for undertaking reforms in the power sector, said the Ministry of Finance in a statement. “Department of Expenditure, Ministry of Finance has granted additional borrowing permission of Rs 7,309 crore to two States for undertaking the stipulated reforms in power sector,” said the statement. While Rajasthan has been allowed to borrow an additional Rs 5,186 crore, Andhra Pradesh has been allowed to borrow additional Rs 2,123 crore as incentive to embark on the reform process.

Additional borrowing: Govt examining proposals from 9 other states

The Ministry of Power is the nodal ministry for the assessment of the performance of states and determining their eligibility for the grant of additional borrowing permission. Apart from Rajasthan and Andhra Pradesh, nine other states, namely Assam, Goa, Kerala, Manipur, Meghalaya, Odisha, Sikkim, Tamil Nadu and Uttar Pradesh have also submitted their proposals to the Ministry of Power, which are under examination. Additional borrowing permission will be issued to eligible states on the basis of the recommendation from the Ministry of Power.

Additional borrowing contingent on power sector reforms

Based on the recommendations of the 15th Finance Commission, the Ministry of Finance had decided to grant additional borrowing space of upto 0.5 percent of the Gross State Domestic Product (GSDP) to states every year for a four-year period from 2021-22 to 2024-25 based on the reforms undertaken by them in the power sector. This was announced by Finance Minister Nirmala Sitharaman in the Budget speech of 2021-22. This will make available additional resources of more than Rs 1 lakh crore every year to states. The objectives of the additional borrowing permissions are to improve the operational and economic efficiency of the power sector and promote a sustained increase in paid electricity consumption.

In order to avail additional borrowing space linked to power sector reforms, state governments have to undertake a set of mandatory reforms and also meet stipulated performance benchmarks. The reforms to be carried out by the states are include, progressive assumption of the responsibility for losses of public sector distribution companies (DISCOMs) by the state government, transparency in the reporting of financial affairs of the power sector, including payment of subsidies and recording of liabilities of governments to discoms and of discoms to others, timely rendition of financial and energy accounts and timely audit and compliance with legal and regulatory requirements.

Once, the aforesaid reforms have been undertaken by the state, the performance of the state is evaluated on the basis of a set of criteria to determine the eligibility for additional borrowing. This includes percentage of metered electricity consumption against total energy consumption, including agricultural connections, subsidy payment by Direct Benefit Transfer (DBT) to consumers, payment of electricity bills by government departments and local bodies, installation of prepaid metres in government offices and use of innovations and innovative technologies. In addition, states are also eligible for bonus marks for privatisation of power distribution companies.

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