Andhra Pradesh second state to undertake power reforms, allowed to raise Rs. 1,515 crore

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

Successful implementation of the reform has made the state eligible to mobilize additional financial resources equivalent to 0.15 percent 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 the COVID-19 pandemic.

Andhra Pradesh has framed a DBT scheme for agricultural consumers in the State. The scheme has been implemented in the Srikakulam district of the state with effect from September 2020. The DBT scheme will be rolled out in the entire state from April 2021 onwards.

The states get permission to raise additional funds equivalent to 0.25 percent 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.

Besides Power Sector Reforms, 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.

Besides Andhra Pradesh, 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 percent of its GSDP on 18th January 2020-21.

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

As per the guidelines issued by the Department of Expenditure, the states undertaking reforms in the power sector are granted permission to raise additional financial resources of up to 0.25 percent of the GSDP.

In view of the resource required to meet the challenges posed by the COVID-19 pandemic, the Government of India had on May 17, 2020 enhanced the borrowing limit of the states by 2 percent of their GSDP. Half of this special dispensation was linked to undertaking citizen-centric reforms by the States.

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 stands at Rs. ­­­73,257 crore.