Power sector reforms: FinMin allows 2 states to borrow additional Rs 7,309 cr

The Department of Expenditure under the Ministry of Finance has granted additional borrowing permission of Rs. 7,309 crore to two states, Rajasthan and Andhra Pradesh, for undertaking the stipulated reforms in the power sector.

In an official statement, it noted that Rajasthan has been allowed to borrow additional Rs 5,186 crore while Andhra Pradesh has been allowed to borrow additional Rs 2,123 crore as incentive to embark on the reform process.

In the Budget speech last year Finance Minister Nirmala Sitharaman had said that based on the recommendations of the Fifteenth Finance Commission, the ministry had decided to grant additional borrowing space of up to 0.5 per cent of the Gross State Domestic Product (GSDP) to the states every year from 2021-22 to 2024-25. This would be based on the reform undertaken by the states in the power sector.

The borrowing permission will make available additional resources of more than Rs 1 lakh crore every year to the states. The objectives of the additional borrowing permissions are to improve the operational and economic efficiency of the sector and promote a sustained increase in paid electricity consumption.

In order to qualify for the additional borrowing space linked to power sector reforms, the state government has to undertake a set of mandatory reforms and also meet stipulated performance benchmarks.

Once the reforms have been undertaken by the state, the performance of the state is evaluated on the basis of specific criteria to determine the eligibility for additional borrowing in 2021-22

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

Apart from Rajasthan and Andhra Pradesh, nine states -- Assam, Goa, Kerala, Manipur, Meghalaya, Odisha, Sikkim, Tamil Nadu and Uttar Pradesh -- have also submitted their proposals to the Ministry of Power, which are under examination. Additional borrowing permission will be issued to eligible states on receipt of recommendation from the power ministry, the statement added.

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