Ten States get additional Rs. 28,204 crore for undertaking power sector reforms

The Department of Expenditure of the Ministry of Finance has given 10 states extra borrowing clearance of Rs. 28,204 crore (US$ 3.71 billion) to carry out the required changes in the electricity industry in 2021-22.

State governments have to complete a set of mandated changes and fulfil specified performance criteria in order to access extra borrowing capacity related to power sector reforms. The states were to carry out the following reforms:

• The state government is gradually taking responsibility for the losses of public sector electricity distribution businesses (DISCOMs).
• Transparency in the financial reporting of the electricity industry, including the payment of subsidies and the recording of government liabilities to DISCOMs and DISCOMs' liabilities to others.
• Financial and energy accounts must be rendered on time, and audits must be completed on time.
• Legal and regulatory criteria must be met.

The states' performance was assessed using the following criteria to determine its eligibility for further borrowing in 2021-22.

• Metered power use is a percentage of overall energy consumption, including agricultural connections.
• Payment of a subsidy to customers via Direct Benefit Transfer (DBT).
• Electricity bills are paid by government departments and municipal governments.
• Prepaid metres are installed in government offices, and innovative technologies are used.

States can also use the increased borrowing facility tied to electricity sector changes in FY 2022-23. States would be eligible for a reward of Rs. 122,551 crore (US$ 16.13 billion) if they implement these changes. 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.