New Delhi: The Expenditure Department of the Ministry of Finance has granted additional borrowing authority of Rs. 7,309 crores to two states for undertaking the stipulated reforms in the power sector. While Rajasthan was allowed to borrow additional rupees. 5,186 crores, Andhra Pradesh was allowed to borrow additional rupees. 2,123 crores as an incentive to embark on the reform process.
The Ministry of Finance, based on the recommendations of the Fifteenth Finance Committee, has decided to provide states with additional borrowing space of up to 0.5% of Gross State Domestic Product (GSDP) each year for a four-year period from 2021-22 to 2024-25 based on the reform undertaken by the States in the electricity sector. This was announced by the Minister of Finance in the 2021-22 budget speech. This will make available additional resources of more than Rs. 1 lakh crore every year in the United States. The objectives of the additional borrowing authorizations are to improve the operational and economic efficiency of the sector and to encourage a sustained increase in the consumption of paid electricity.
In order to benefit from additional borrowing space related to power sector reforms, the state government must undertake a set of mandatory reforms and also meet the stipulated performance criteria. The reforms to be carried out by the States are –
- Gradual assumption of the losses of public distribution companies (DISCOM) by the State.
- Transparency in reporting on the financial affairs of the electricity sector, including the payment of subsidies and the recording of debts of governments to DISCOMs and of DISCOMs to others.
- Timely reporting of financial and energy accounts and timely audit.
- Compliance with legal and regulatory requirements.
Once the said reforms are initiated by the State, the performance of the State is assessed on the basis of the following criteria to determine eligibility for additional borrowing in 2021-22
- Percentage of metered electricity consumption out of total energy consumption, including agricultural connections
- Payment of subsidy by Direct Benefit Transfer (DBT) to consumers
- Payment of electricity bills by State services and local authorities
- Installation of prepaid meters in the government office
- Use of innovations and innovative technologies
In addition, states are also eligible for bonus points for the privatization of electricity distribution companies.
The Department of Energy is the nodal department responsible for evaluating states’ performance and determining their eligibility to grant additional borrowing authority. 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 Department of Energy, which are currently being reviewed. Additional borrowing authority will be issued to eligible states on the recommendation of the Department of Energy.