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Andhra Pradesh has become the second state to undertake the power sector reforms stipulated by the Finance Ministry's Department of Expenditure, and has become eligible to mobilise additional financial resources equivalent to 0.15 percent of its Gross State Domestic Product (GSDP).

As part of the reforms, the state has started Direct Benefit Transfer (DBT) of electricity subsidy to farmers with effect from September 2020, thus successfully implementing one out of the three stipulated reforms in the power sector.

Accordingly, the Department of Expenditure has granted permission to the state to raise additional borrowing of Rs 1,515 crore. This has provided it much-needed additional financial resources to fight the Covid-19 pandemic.

Besides Andhra Pradesh, Madhya Pradesh has also undertaken reforms in the power sector, and was given additional borrowing permission of Rs 1,423 crore, equivalent to 0.15 percent of its GSDP, on January 18.

Power sector reforms stipulated by the Finance Ministry aim at creating a transparent and hassle-free provision of power subsidy to farmers and to prevent leakages. They also aim at improving the health of power distribution companies by alleviating their liquidity stress in a sustainable manner.

As per the guidelines issued by the Department of Expenditure, the states undertaking reforms in power sector are granted permission to raise additional financial resources of up to 0.25 percent of the GSDP. This is linked to a set of 3 reforms in the sector.

Andhra Pradesh has framed a DBT scheme for agricultural consumers in the state. The scheme was implemented in Srikakulam district with effect from September 2020, and will be rolled out across the entire state from April 2021 onwards.

In view of the resource requirement to meet the challenges posed by the pandemic, the Centre had, on May 17, 2020, enhanced the borrowing limit of the states by 2 per cent of their GSDP. Half of this special dispensation was linked to undertaking citizen centric reforms by them.

The states get permission to raise additional funds equivalent to 0.25 percent of GSDP on completion of reforms in each sector. The four citizen centric areas identified for reforms were implementation of 'One Nation One Ration Card' system, ease of doing business reform, urban local body/utility reforms and power sector reforms.

Besides the power sector reforms, Andhra Pradesh has also completed One Nation One Ration Card reform, urban local bodies reforms and ease of doing business reforms. Therefore, the state has been granted permission to raise a total additional amount of Rs 9,190 crore as incentive to carry out reforms in these citizen-centric areas.

Till now, 16 states have carried out at least one of the four reforms and have been granted reform linked borrowing permissions. Out of these, 12 states have implemented the ration card system reform, 11 have done ease of doing business reforms, five have done local body reforms and two have undertaken power sector reforms. Total reform linked additional borrowing permission issued so far to the states stands at Rs 73,257 crore.