Finance Ministry Allows 12 States To Borrow Rs 66,413 Crore Extra For Undertaking Power Sector Reforms

West Bengal has received borrowing permission worth Rs 15,263 crore, followed by Rajasthan (Rs 11,308 crore), Andhra Pradesh (Rs 9,574 crore), Kerala (Rs 8,323 crore), and Tamil Nadu (Rs 7,054 crore).

These permissions were granted based on the reforms undertaken by these state governments over the past two financial years.  ( Image Source :Getty )

The Finance Ministry granted 12 states additional borrowing permissions totaling Rs 66,413 crore as financial incentives for implementing power sector reforms. These permissions were granted based on the reforms undertaken by these state governments over the past two financial years. 

"Based on the recommendations of the Ministry of Power, the Ministry of Finance has granted permission for reforms undertaken in 2021-22 and 2022-23 to 12 state governments. Over the last two financial years, they have been allowed to raise financial resources of Rs 66,413 crore through additional borrowing permissions," the ministry said in a statement.

As per the data released by the finance ministry, West Bengal has received borrowing permission worth Rs 15,263 crore, followed by Rajasthan (Rs 11,308 crore), Andhra Pradesh (Rs 9,574 crore), Kerala (Rs 8,323 crore) and Tamil Nadu (Rs 7,054 crore) in the two fiscal. Other eligible states include Assam (Rs 4,359 crore), Himachal Pradesh (Rs 251 crore), Manipur (Rs 180 crore), Meghalaya (Rs 192 crore), Odisha (Rs 2,725 crore), Sikkim (Rs 361 crore), Uttar Pradesh (Rs 6,823 crore), and West Bengal (Rs 15,263 crore). 

"The Department of Expenditure has given a boost to reforms by the states in power sector by providing financial incentives in the form of additional borrowing permissions," the finance ministry said, adding over Rs 1.43 lakh crore incentive would be available for the states in 2023-24 for reforms in the power sector.

The initiative was announced by the Union Finance Minister Nirmala Sitharaman in Union Budget 2021-22. Under this initiative, an additional borrowing space of up to 0.5 per cent 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 the implementation of specific reforms in the power sector by the States, the statement said. 

"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," the Ministry added.

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.

States have to fulfill certain criteria to qualify for the incentives, including implementing mandatory reforms and meeting performance benchmarks. These reforms involve the gradual assumption of losses incurred by public sector power distribution companies (DISCOMs) by the state government, as well as ensuring transparency in reporting the financial affairs of the power sector.

Once the reforms are completed, the state's performance is assessed using specific criteria to determine the incentive amount, which can range from 0.25 to 0.5 per cent of the state's GDP based on their performance.