Andhra Pradesh: 2nd State to undertake Power Sector reforms

February 5, 2021

Andhra Pradesh has become the second State to implement the power sector reforms that was put forward by the Department of Expenditure, Ministry of Finance.

Highlights

  • The state has implemented the one of the three reforms that was bought in 2020.
  • Under the reform, the state has started the Direct Benefit transfer (DBT) of electricity subsidy to farmers with effect from September, 2020 itself.
  • After implementing the reform, State is now eligible to mobilise additional financial resources equal to 0.15 percent of the Gross State Domestic Product (GSDP).
  • Andhra Pradesh has also completed One Nation One Ration Card reform, Ease of Doing Business Reforms and Urban Local Bodies Reforms besides the power sector reforms.
  • Thus, Andhra Pradesh has been granted permission to raise a total additional amount of Rs. 9,190 crores as incentive.
  • This amount will be used by the state to carry out reforms in the four citizen centric areas.
  • Before Andhra Pradesh, Madhya Pradesh undertook the reforms in the power sector. It was given additional borrowing permission of Rs. 1,423 crores which is equal to 0.15 percent of its GSDP.

About Power Sector Reforms

  • The Power Sector reforms were stipulated by the Ministry of Finance.
  • The reforms were put forward with the aim of creating a transparent and hassle-free provision of power subsidy to the farmers.
  • It also seeks to prevent leakages.
  • These reforms also aim to improve the health of power distribution companies by lowering their liquidity stress in a sustainable manner.

Guidelines to raise finance

The Department of Expenditure has made guidelines for the States who are undertaking reforms in power sector. As per the guidelines, the states can raise additional financial resources of up to 0.25 percent of the GSDP.

Background

The government of India has enhanced the borrowing limit of the States by 2 percent of the GSDP in the backdrop of the challenges faced by the states amid the COVID-19 pandemic in May 2020. Further, the states were allowed to raise additional fund amounting to 0.25% of GSDP. For that purpose, four citizen centric areas were identified for reforms namely, Ease of doing business reform, Implementation of One Nation One Ration Card System, (Urban Local body or utility reforms and Power Sector reforms.

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