Power sector reforms may be eligible for additional borrowing space

New Delhi India January 19 ANI Ministry of Finance, Government of India, launched a programme in June 2021 to allow additional borrowing space to State Governments, which is conditional on the undertaking and sustaining specific reforms in the power sector, said the Ministry of Power on Tuesday.

The ministry said that REC Ltd is working as a nodal agency for the implementation of the scheme.

The ministry says the additional borrowing limit for power sector reforms is 0.5 per cent of the Gross State Domestic Product GSDP of the state.

The requirements of reforms and actions have been kept less burdensome in the first year of the current version of the scheme, with the bar raised for future years, pushing the states towards higher level reforms.

The states can commit to reforms and be eligible for increased borrowing space of Rs. There were 80,000 Crores. This scheme adopts a novel approach to incentivize the states to commit to reforms and in turn to get benefits in the form of availability of enhanced financial resources.

Nearly 20 states have shown interest in taking advantage of the scheme this financial year. The Ministry of Finance had approved the proposal and the state has already availed additional borrowings of more than 2100 Crore, based on the recommendations of the Ministry of Power in relation to such a proposal from Andhra Pradesh state.

Manipur and Rajasthan are under active consideration at the Ministry of Finance, both of which may be eligible for the maximum borrowing space of 0.50 per cent, based on reforms carried out by them in the power sector. The rest of the states are submitting their proposals.

It is noteworthy that last year a slightly different version of the scheme was made applicable, which allowed 24 states to take advantage of the same and avail additional borrowing limits of more than Rs. 13,000 Crore.

The framework was revised this year to include incremental reform requirements that the States must commit to in their power segment because of the learnings from bringing out such a scheme and the reception it received from the states.

There are a number of provisions in the scheme viz. Timely publication of annual accounts, filing of tariff petition, issuance of tariff orders, subsidy accounting, publication of Energy Accounts, adopting newer innovative technologies etc. The Revamped Distribution Sector Scheme is again a reform-based and result oriented scheme by the Ministry of Power.

Both of these schemes allow states to benefit from additional money that becomes available, based on their commitment to underlying reforms as well as being able to showcase corresponding outcomes.

In current times wherein massive infrastructure has already been deployed under flagship central schemes of DDUGJY, IPDS, Saubhagya and having met the goal to make available the power supply to all willing households, the Government of India has met the goal to make available the power supply to all willing households.

India is focusing its efforts on making sector operations more robust, efficient and sustainable, with the end goal being to make available 24 x 7, quality, reliable and affordable power to all consumers.