Home / Industry / Energy /  Centre allows 10 states to borrow Rs28,204 crore more for undertaking power sector reforms

Centre allows 10 states to borrow Rs28,204 crore more for undertaking power sector reforms

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.Premium
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.

  • Among the 10 states, TN was allowed to borrow the highest additional amount of 7,054 crore, followed by UP, which has been allowed to borrow 6,823 crore more and Andhra Pradesh, allowed to borrow additional 3,716 crore

NEW DELHI : The Union Ministry of Finance has granted additional borrowing permission of 28,204 crore to 10 states for undertaking stipulated reforms in power sector in 2021-22.

A statement from the ministry showed that among the 10 states, Tamil Nadu was allowed to borrow the highest additional amount of 7,054 crore, followed by Uttar Pradesh, which has been allowed to borrow 6,823 crore more and Andhra Pradesh, allowed to borrow additional 3,716 crore.

The finance ministry had decided to grant additional borrowing space of up to 0.5% 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, based on the recommendations of the Fifteenth Finance Commission. It was announced by the by finance minister Nirmala Sitharaman in her budget speech of 2021-22.

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, according to the government. The department of expenditure, under the finance ministry came up with the guidelines this regard June 9, 2021.

In order 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 include progressive assumption of responsibility for losses of public sector power distribution companies, transparency in the reporting of financial affairs of power sector including payment of subsidies and recording of liabilities of governments to discoms, among other compliances and reforms.

The performance of the state was evaluated on the basis of several parameters including 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 among others.

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

The power ministry is the nodal ministry for assessment of performance of states and determining their eligibility for granting additional borrowing permission.

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 1,22,551 crore will be available as incentive to states for undertaking these reforms in 2022-23. The states which did 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. 

ABOUT THE AUTHOR

Rituraj Baruah

Rituraj Baruah is a senior correspondent at Mint, reporting on housing, urban affairs, small businesses and energy. He has reported on diverse sectors over the last six years including, commodities and stocks market, insolvency and real estate. He has previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.
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