10 States get an additional 28,204C for undertaking power sector reforms

Apr 07:Department of Expenditure, Ministry of Finance, has granted additional borrowing permission of Rs. 28,204 crore to 10 States for undertaking the stipulated reforms in the power sector in 2021-22. State-wise amount of additional borrowing allowed to States as an incentive to embark on the reform process is as follows:

Sl.No.StateAmount (Rs in crore)
1.Andhra Pradesh3,716
3.Himachal Pradesh251
9.Tamil Nadu7,054
10.Uttar Pradesh6,823

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

The objectives of granting financial incentives as additional borrowing permissions for taking up reforms in the power sector are to improve the operational and economic efficiency of the sector and promote a sustained increase in paid electricity consumption. Detailed guidelines and marking criteria in this regard were issued by the Department of Expenditure on 09th June 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 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 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. 
  • 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 the government office
  • Use of Innovations and Innovative technologies

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

The Ministry of Power is the nodal Ministry for the assessment of the performance of States and determining their eligibility for granting additional borrowing permission.

In the financial year 2022-23 too, the States can avail of the facility of additional borrowing linked to reforms in the power sector. An amount of Rs. 1,22,551 crore will be available as an incentive to States for undertaking these reforms in 2022-23. States who could not complete the reform process in 2021-22 may also avail of the benefit of additional borrowing earmarked for 2022-23 if they carry out the reforms in the current financial year. 


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