10 States get nod to borrow ₹28204 crore

Subject: Polity

Section: Federalism

Context: Move based on 15th Finance Commission recommendations following power sector reforms by States

Background:

Finance Ministry, based on the recommendations of the 15th Finance Commission, had decided to grant the additional borrowing space of up to 0.5 per cent of the Gross State Domestic Product (GSDP) to the States every year for four years from FY22 to FY25 based on reforms undertaken by them in the power sector.
This was announced by the Finance Minister in the Budget speech for FY22. The Power Ministry is the nodal agency for assessment of the performance of States and determining their eligibility for granting additional borrowing permission.
To avail of the additional borrowing, the States have to undertake a set of mandatory reforms and also meet stipulated performance benchmarks.
- The reforms include assuming responsibility for losses of Discoms, transparent reporting of power sector finances, including payment of subsidies as well as the recording of liabilities of governments to Discoms.
- It also includes timely rendition of the financial and energy accounts, and its timely audit.
States who could not complete the reform process in FY22 may also avail of the benefit for FY23 if they carry out the reforms in the current financial year.

Borrowing by States

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