The Union Finance Ministry is awaiting the recommendation from the Union Power Ministry on the proposal by the Meghalaya government for additional borrowing permission for undertaking the stipulated reforms in power sector.
A few days ago, the Department of Expenditure, Ministry of Finance has granted additional borrowing permission to Rajasthan and Andhra Pradesh for undertaking the stipulated reforms in power sector. While, Rajasthan has been allowed to borrow additional Rs 5,186 crore, Andhra Pradesh has been allowed to borrow additional Rs 2,123 crore as incentive to embark on the reform process.
Apart from Rajasthan and Andhra Pradesh, nine other states, namely Meghalaya, Manipur, Assam, Sikkim, Goa, Kerala, Odisha, Tamil Nadu and Uttar Pradesh have also submitted their proposals to the Power Ministry, which are under examination.
According to the Finance Ministry, additional borrowing permission will be issued to these nine states on receipt of recommendation from the Power Ministry.
The Power Ministry is the nodal ministry for assessment of performance of states and determining their eligibility for granting additional borrowing permission.
The Finance Ministry, based on the recommendations of the Fifteenth Finance Commission, has decided to grant additional borrowing space of up to 0.5 percent of the Gross State Domestic Product (GSDP) to the states every year for a four year period from 2021-22 to 2024-25 based on reform undertaken by the states in the power sector.
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 avail 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.
The reforms to be carried out by the states are progressive assumption of responsibility for losses of public sector distribution companies (discoms) by the State government, transparency in the reporting of financial affairs of power sector including payment of subsidies and recording of liabilities of governments to discoms and of discoms to others, timely rendition of financial and energy accounts and timely audit and compliance with legal and regulatory requirements.
Once these reforms have been undertaken by the State, the performance of the State is evaluated on the basis of the following criteria to determine the eligibility for additional borrowing in 2021-22.
The criteria include percentage of metered electricity consumption against total energy consumption including agricultural connections, subsidy payment by Direct Benefit Transfer (DBT) to consumers, payment of electricity bills by government departments and local bodies, installation of prepaid meters in government office and use of Innovations and innovative technologies.
In addition, states are also eligible for bonus marks for privatisation of the power distribution companies.
