States will have access to Rs 1.4 trillion additional market borrowing in FY24 as part of the finance ministry’s push to encourage states for power sector reforms.
The scheme was first announced in FY22 Budget, allowing states additional borrowing space of up to 0.5 percent of the Gross State Domestic Product (GSDP) for a four-year period from FY22 to FY25.
The ministry said that the states that were unable to complete the reform process in 2021-22 and 2022-23 may also benefit from the additional borrowing earmarked for FY24, if they carry out the reforms in the current financial year.
States are also eligible for bonus marks for privatisation of power distribution companies (discoms). Among reforms that state governments must undertake to receive the incentives include progressive assumption of responsibility for losses of public sector discoms, timely rendition of financial and energy accounts, and timely audit. States must also show transparency in reporting of financial affairs of the power sector, including payment of subsidies and recording of liabilities of Governments to discoms.
The scheme was launched during the pandemic years to assist discoms marred by low revenue generation and standstill status of enforcement of reforms induced by the Centre under several reform schemes. Last year, at least 20 states showed interest in the scheme. Andhra Pradesh was the first to receive the approval for additional borrowing.
REC Ltd., a nodal agency, had last year said the two schemes aim to benefit states from the additional money that becomes available, “based on their commitment to underlying reforms as well as on being able to showcase corresponding outcomes.”
