Ministry of Finance provides financial incentives to states to accelerate power sector reforms

The Ministry of Finance has given a boost to reforms by the states in power sector by providing financial incentives in the form of additional borrowing permissions.

Based on the recommendations of the Ministry of Power, the Ministry of Finance has granted permission for reforms undertaken in 2021-22 and 2022-23 to 12 state governments. Over the last two financial years, they have been allowed to raise financial resources of Rs 664.13 billion through additional borrowing permissions. This move aims to encourage and support the states in undertaking reforms to enhance the efficiency and performance of the power sector. The initiative was announced in the Union Budget 2021-22. Under this initiative, an additional borrowing space of up to 0.5 per cent of the gross state domestic product is available to the states annually for a four-year period from 2021-22 to 2024-25. This additional financial window is dependent on implementation of specific reforms in the power sector by the states. Notably, an amount of Rs 1,433.32 billion will be available as an incentive to states for undertaking these reforms in 2023-24.