The Centre has granted additional borrowing permission of `28,204 crore to 10 states to undertake stipulated reforms in the power sector in FY22, indicating reluctance of most of the states to take measures to improve the financial health of state power distribution companies (discoms).
The additional conditional borrowing window utilisation was only 28% of the stipulated Rs 1 trillion or 0.5% of aggregate GSDP available to all states for the last financial year.
Tamil Nadu was the biggest beneficiary of the reform-linked borrowing in FY22 with approval to raise Rs 7,054 crore, followed by Uttar Pradesh (Rs 6,823 crore), Rajasthan (Rs 5,186 crore) and Andhra Pradesh (Rs 3,716 crore).
For FY23 too, the states can avail the facility of additional borrowing linked to reforms in power sector to the tune of 0.5% of aggregate GSDP or Rs 1.22 trillion.
The Union finance ministry, based on the recommendations of the 15th Finance Commission, had decided to grant additional borrowing space of up to 0.5% of the GSDP to states every year from FY22 to FY25, based on power sector reforms undertaken by the states.
The objectives of granting financial incentives were to improve the operational and economic efficiency of the power sector, and promote a sustained increase in paid electricity consumption.