FinMin allows Andhra to borrow addl Rs 1,515 cr for power sector reforms

The Finance Ministry on Thursday allowed Andhra Pradesh to borrow an additional Rs 1,515 crore for undertaking power sector reforms.

As part of the reforms, the state has started Direct Benefit Transfer (DBT) of electricity subsidy to farmers with effect from September 2020. Thus, it has successfully implemented one of the three stipulated reforms in the power sector.

"Successful implementation of the reform has made the State eligible to mobilise additional financial resources equivalent to 0.15 per cent of its Gross State Domestic Product (GSDP). Accordingly, the Department of Expenditure has granted permission to the State to raise additional borrowing of Rs 1,515 crore. This has provided the much needed additional financial resources to the state to fight COVID-19 pandemic," it said.

Madhya Pradesh has also undertaken reforms in the power sector.

Accordingly, the state was given additional borrowing permission of Rs 1,423 crore, equivalent to 0.15 per cent of its GSDP on January 18, 2020-21.

Power Sector reforms stipulated by the Ministry of Finance aimed at creating a transparent and hassle-free provision of power subsidy to farmers and prevent leakages. They are also aimed at improving the health of power distribution companies by alleviating their liquidity stress in a sustainable manner.

In view of the resource required to meet the challenges posed by the COVID-19 pandemic, the central government had in May last year enhanced the borrowing limit of the states by 2 per cent of their GSDP. Half of this special dispensation was linked to undertaking citizen-centric reforms by the states.

The states get permission to raise additional funds equivalent to 0.25 per cent of GSDP on completion of reforms in each sector. The four citizen-centric areas identified for reforms were implementation of One Nation One Ration Card System, Ease of doing business reform, Urban Local body/ utility reforms and power sector reforms.

Further, Andhra Pradesh has also completed One Nation One Ration Card reform, Urban Local Bodies Reforms and Ease of Doing Business Reforms.

Therefore, the state has been granted permission to raise a total additional amount of Rs 9,190 crore as an incentive to carry out reforms in these citizen-centric areas.

Till now, 16 states have carried out at least one of the four stipulated reforms and have been granted reform linked borrowing permissions. Out of these, 12 states have implemented the one nation one ration card system, 11 states have done ease of doing business reforms, 5 states have done local body reforms and 2 states have undertaken power sector reforms.

Total reform linked additional borrowing permission issued so far to the states stood at Rs 73,257 crore.