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Giving power sector reforms a fresh 'leg up', Madhya Pradesh has started Direct Benefit Transfer (DBT) of electricity subsidy to farmers in a single district of the state from December 2020.

Therefore, the state has successfully implemented one out of the three stipulated reforms in the power sector.

The reforms stipulated by the Finance Ministry has made the state eligible to mobilise additional financial resources equivalent to 0.15 per cent of its Gross State Domestic Product (GSDP).

Accordingly, the Department of Expenditure has granted permission to the state to mobilise additional financial resources of Rs 1,423 crore through Open Market Borrowings. This has provided the much needed additional financial resources to the state to fight the Covid-19 pandemic.

The power sector reforms stipulated by the Finance Ministry are aimed at creating a transparent and hassle-free provision of power subsidy to farmers and 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 the power sector are granted permission to raise additional financial resources of up to 0.25 per cent of the GSDP.

This is linked to a set of three reforms in the sector, including 0.05 per cent of GSDP for reduction in Aggregate Technical and Commercial losses in the state as per prescribed targets, another 0.05 per cent of GSDP is allowed for reduction in the gap between Average Cost of Supply and Average Revenue Realisation (ACS-ARR gap) in the state as per prescribed targets.

Finally, 0.15 per cent of GSDP of the state on introduction of Direct Benefit Transfer (DBT) to all farmers in the state in lieu of free/subsidised electricity. For this, the state government had to frame a scheme for cash transfer and implement it in at least one district by December 31, 2020.

Madhya Pradesh has framed a DBT scheme for agricultural consumers in the state. The scheme has been implemented in Vidisha district of the state, where electricity is supplied through the M.P. Madhya Kshetra Vidyut Vitaran Co. Limited with effect from December 2020. Under the scheme an amount of Rs 32.07 crore was transferred to the bank accounts of 60,081 beneficiaries in December 2020. The state has also initiated a process to implement the DBT scheme in Jhabua and Seoni districts as well.

Based on the learning from implementation of the scheme in three districts in Phase-1, the scheme would be rolled out in the entire state in the Financial Year 2021-22.

In view of the resource requirement to meet the challenges posed by the Covid-19 pandemic, the Government of India on May 17, 2020 enhanced the borrowing limit of the states by two per cent of their GSDP. Half of this special dispensation was linked to undertaking citizen centric reforms by the states.

The states get permission to raise additional funds equivalent to 0.25 per cent of GSDP on completion of reforms in each sector. The four citizen centric areas identified for reforms were the Implementation of 'One Nation One Ration Card System', Ease of Doing Business reform, Urban local body/utility reforms and power sector reforms.

Till now 14 states have carried out at least one of the four stipulated reforms and have been granted reform linked borrowing permissions. Eleven states have implemented the 'One Nation One Ration Card System', eight states have implemented the ease of doing business reforms, four states have done local body reforms and Madhya Pradesh has implemented the power sector reforms. Total reform linked additional borrowing permission issued to the states till now stands at Rs 62,762 crore.