Andhra Pradesh: 2nd State to Undertake Power Sector Reforms

Andhra Pradesh has become the second stated to undertake the power sector reforms stipulated by the Department of Expenditure. This was notified by the Ministry of Finance.

Key Points

• As part of the power sector reforms, Andhra Pradesh has started a Direct Benefit Transfer (DBT) of electricity subsidy to farmers with effect from September 2020.
• With this, the State has successfully implemented one of the three stipulated reforms in the power sector.
• After this successful implementation of the reform, the State is eligible to mobilize additional financial resources equivalent to 0.15 percent of its Gross State Domestic Product (GSDP).
• Thus, the state has been allowed to raise additional borrowing of Rs 1,515 crore by the Department of Expenditure.
• Other than Andhra Pradesh, Madhya Pradesh has also undertaken power sector reforms.
• Madhya Pradesh has been allowed to borrow additional Rs 1,423 crore (0.15% of its GSDP).
• As per the Department of Expenditure guidelines, states undertaking power sector reforms are allowed to raise additional financial resources of up to 0.25% of the GSDP.
• The reforms are divided into three sets- 0.05% of GSDP is permitted for reducing the gap between the Average Cost of Supply and Average Revenue Realisation (ACS-ARR gap). Another 0.5% of GSDP is allowed or a decrease in Aggregate Technical & Commercial losses and 0.15% of GSDP is permitted for Direct Benefit Transfer (DBT) of electricity subsidy to all farmers in the state.

In May 2020, the Indian government increased the borrowing limit of the states by 2% of their GSDP. Half of this increase has been linked with the implementation of citizen-centric schemes- Ease of doing business reform, One Nation One Ration Card System, Power Sector reforms, and Urban Local body/ utility reforms.

Along with Power sector reforms, Andhra Pradesh has also implemented Urban Local Bodies Reforms, One Nation One Ration Card reform, and Ease of Doing Business Reforms.