Ten States Including UP, Andhra And Tamil Nadu Get Additional Rs 28,204 Crore For Undertaking Power Sector Reforms

The Ministry of Finance has granted additional borrowing permission of Rs 28,204 crore to 10 states for undertaking the stipulated reforms in power sector in 2021-22, an official release said on Thursday (7 April).

The states that got additional borrowing permission are Andhra Pradesh, Assam, Himachal Pradesh, Manipur, Meghalaya, Odisha, Rajasthan, Sikkim, Tamil Nadu and Uttar Pradesh, according to a Finance Ministry release.

Based on the recommendations of the Fifteenth Finance Commission, the Finance Ministry had decided to grant additional borrowing space of upto 0.5 percent of the Gross State Domestic Product (GSDP) to the States every year for a four year period from 2021-22 to 2024-25 based on reforms undertaken by the states in the power sector.

The announcement was made by Finance Minister Nirmala Sitharaman in the budget speech of 2021-22.

According to the ministry, the objectives of granting financial incentives as additional borrowing permissions for taking up reforms in power sector are to improve the operational and economic efficiency of the sector, and promote a sustained increase in paid electricity consumption.

To avail additional borrowing space linked to Power sector reforms, the state governments had to undertake a set of mandatory reforms and also meet stipulated performance benchmarks.

The reforms to be carried out by the states were:

• Progressive assumption of responsibility for losses of public sector power distribution companies (DISCOMs) by the State Government.

• Transparency in the reporting of financial affairs of 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.

• Compliance with legal and regulatory requirements.

Once, the aforesaid reforms were undertaken by a state, the performance of the state was evaluated on the basis of the following criteria to determine its eligibility for additional borrowing for 2021-22

• 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 meters in government office

• Use of Innovations and Innovative technologies

In addition, the states were also eligible for bonus marks for privatisation of power distribution companies.

The Ministry of Power is the nodal ministry for assessment of performance of states and determining their eligibility for granting additional borrowing permission, the release said.

The Finance Ministry further said that in the financial year 2022-23 too, the states can avail the facility of additional borrowing linked to reforms in power sector.

An amount of Rs 1,22,551 crore will be available as incentive to states for undertaking these reforms in 2022-23.

The states that could not complete the reform process in 2021-22 may also avail benefit of additional borrowing earmarked for 2022-23, if they carry out the reforms in current financial year, it added.