Madhya Pradesh (MP) has become the first State to give electricity subsidy through Direct Benefit Transfer (DBT) thereby successfully implementing one out of the three stipulated reforms in the power sector.

• This achievement has made it eligible for additional borrowing equivalent to 0.15% of its Gross State Domestic Product (GSDP). In this regard, the Expenditure Department under the Finance Ministry already approved Rs 1,423 crore through Open Market Borrowings.

Implementation Process of electricity subsidy through DBT by MP:

In December, 2020, the phase-1 of DBT of electricity subsidy scheme to farmers was initiated by the state in its Vidisha district where electricity is supplied through the MP Madhya Kshetra Vidyut Vitaran Co Ltd. There, the state transferred an amount of Rs 32.07 crore to the bank accounts of 60,081 beneficiaries.

• The State also started implementing this process in Jhabua and Seoni districts. Based on the outcome, the scheme will be rolled out in the entire State in FY2021-22.

What are the three stipulated reforms in the power sector?

In order to create hassle-free provision of power subsidy and to improve the financial condition of power distribution companies, the Central government has stipulated a set of three reforms in the power sector for the states. Upon their fulfilment, the states become eligible for additional financial resources of up to 0.25% of the GSDP. These are:

i.Reduction in Aggregate Technical and Commercial losses in the State.

•  Additional Borrowing Allowed: 0.05% of GSDP.

ii.Reduction in the gap between Average Cost of Supply and Average Revenue Realisation (ACS-ARR gap) in the State.

• Additional Borrowing Allowed: 0.05% of GSDP.

iii.Introduction of DBT to all farmers in the State in lieu of free/subsidised electricity.

•  Additional Borrowing Allowed: 0.15% of GSDP

Background:

On May 17, 2020, the Central Government enhanced the borrowing limit of the States by 2% of their GSDP in order to meet the challenges posed by the Covid-19 pandemic. Half of this disbursal is subject to the condition that states must carry out reforms in the following 4 identified areas:

• Implementation of One Nation One Ration Card System

• Ease of doing business reform

• Urban Local body/ utility reforms

• Power Sector reforms.

Currently, 14 States have carried out at least one of the four stipulated reforms. Out of these, 11 States have implemented the One Nation One Ration Card System, 8 States have done ease of doing business reforms, 4 States have done local body reforms and Madhya Pradesh has implemented power sector reforms.

•  So far, the Central Government has issued 62,762 crore as an additional borrowing for the above mentioned reforms.

About Madhya Pradesh:

Chief Minister (CM)– Shivraj Singh Chouhan

Capital– Bhopal

Governor– Anandiben Mafatbhai Patel