Government Earmarks Rs 1.43 Lakh Crore As Incentive For Power Reforms In FY24

The government has earmarked Rs 1,43,332 crore as incentives states can avail through additional borrowing for undertaking reforms in the power sector in fiscal 2024.

Twelve states have received the central government's permission for additional borrowings worth Rs 66,413 crore cumulatively over the last two years for enacting power sector reforms, according to a statement by the Finance Ministry.

Andhra Pradesh, Assam, Himachal Pradesh, Kerala, Manipur, Meghalaya, Odisha, Rajasthan, Sikkim, Tamil Nadu, Uttar Pradesh and West Bengal have received the additional borrowing capacity for reforms undertaken in 2021-22 and 2022-23.

"States that were unable to complete the reform process in 2021-22 and 2022-23 may also benefit from the additional borrowing earmarked for 2023-24, if they carry out the reforms in the current financial year," the Ministry of Finance said in a statement.

Borrowing Facility Linked To Reforms

States are eligible for an additional borrowing space of up to 0.5% of the Gross State Domestic Product annually, for a four-year-period from 2021-22 to 2024-25. This additional borrowing facility is contingent upon implementation of specific reforms in the power sector by states.

The budget for FY24 set the state borrowing limit at 3.5% of GSDP FY24, with an additional 0.5% earmarked as conditional window linked to power sector reforms.

Last year in April, 10 states were eligible for borrowing an additional amount of Rs 28,204 crore for undertaking power reforms for the year. This year saw Kerala and West Bengal join the list, with the latter claiming the highest share worth Rs 15,263 crore.

Availing the additional borrowing facility involves states completing specific reforms and getting their performance evaluated by the Power Ministry. The evaluation is based on specific criteria to determine a state's eligibility for the incentive amount, the Finance Ministry said.

The required reforms include:

• Progressive assumption of responsibility for loss of public sector power distribution companies, or 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. 

• Compliance with legal and regulatory requirements.

Apart from this, states are eligible for bonus marks for privatisation of power distribution companies