The Union government has permitted Andhra Pradesh to avail of an additional borrowing space of up to 0.5 per cent of the Gross State Domestic Product (GSDP).
With this, the State government can go for an additional borrowing of up to ₹9,574 crore. This additional financial window is dependent on the implementation of specific reforms in the power sector by the government.
Based on the recommendations of the Union Ministry of Power, the Union Ministry of Finance has granted permission for reforms undertaken in the 2021-22 and 2022-23 financial years to 12 State governments, including Andhra Pradesh.
Over the last two financial years, they have been allowed to raise financial resources of ₹66,413 crore through additional borrowing permissions. This includes ₹9,574 crore by Andhra Pradesh.
The Department of Expenditure, Ministry of Finance, has boosted reforms by the States in the power sector by providing financial incentives in the form of additional borrowing permissions.
This move is aimed at encouraging and supporting the States in undertaking reforms to enhance the efficiency and performance of the power sector. The initiative was announced in the Union Budget 2021-22.
The primary objective of granting financial incentives for undertaking power sector reforms are to improve operational and economic efficiency within the sector and promote a sustained increase in paid electricity consumption.
To be eligible for the incentives, the State governments must undertake a set of mandatory reforms and meet stipulated performance benchmarks.
The required reforms include, among others, a 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 the governments to the DISCOMs and of DISCOMs to others; timely rendition of financial and energy accounts and timely audit; and compliance with legal and regulatory requirements.
Upon completion of the reforms, a State’s performance is evaluated based on specific criteria to determine its eligibility for the incentive amount, which may range from 0.25% to 0.5% of the GSDP.
