Indian states’ borrowing limit for power reforms enhanced by over Rs 1 lakh crore in FY22

India’s Finance Minister Nirmala Sitharaman said that states have been allowed Rs 1,05,864 crore of additional borrowing in FY22 as a part of the credit leeway announced in May 2020.

“States have already been allowed additional borrowing for four years (starting FY22) up to 0.5% of GSDP annually subject to carrying out specified power sector reforms,” she said.

States have been asked to take steps to improve the discoms’ corporate governance and increase intervention of IT-enabled infrastructure to lower pilferage in power supply to avail a part of the increased net borrowing permitted by the government.

The discom reform scheme, the latest in a series of four over the last two decades starting with the accelerated power development and reforms programme (APDRP) unveiled in 2001, is seen to address the core issues of billing-collection inefficiencies and pilferage that cripple the sector.

Of the Rs 3.03-lakh-core financial assistance, envisaged over five years under the scheme, the federal government’s share will be Rs 97,631 crore. The new scheme is contingent on the discoms committing to undertake structural reforms and infrastructure creation such as feeder separation and smart meters, to address the core issues of billing-collection inefficiencies and pilferage that cripple the sector.

The promised grants under the scheme would get converted into loans, unless they met the parameters aimed at reducing their sticky losses.

The new scheme will subsume the existing federal government schemes for discoms — such as the Integrated Power Development Scheme, the Deen Dayal Upadhyaya Gram Jyoti Yojana and Saubhagya — which have similar targets of household electrification, reduction of losses through smart metering, feeder separation and general upgrade of distribution infrastructure.

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