Andhra Pradesh becomes second State to undertake power sector reforms

Andhra Pradesh becomes second State to undertake power sector reforms

Part of: GS Prelims and GS- III – Infrastructure

In news 

• Andhra Pradesh has become the second State to undertake the power sector reforms stipulated by the Department of Expenditure, Ministry of Finance.

Key takeaways 

• As part of the reforms, the State has started Direct Benefit transfer (DBT) of electricity subsidy to farmers with effect from September, 2020.
• Thus, the State has successfully implemented one out of the three stipulated reforms in the power sector.
• Besides Andhra Pradesh, Madhya Pradesh has also undertaken reforms in the power sector.

Important value additions 

• 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:

1. 1. 0.05 % of GSDP for reduction in Aggregate Technical & Commercial losses in the State as per prescribed targets.
   2. Another 0.05 % 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.
   3. Finally, 0.15 % 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 has to frame a scheme for transfer of cash and implement the scheme in at least one district by 31st December, 2020.