THIRUVANANTHAPURAM: Left gasping following the borrowing cuts effected by the Union government, Kerala got a little breathing room after the Centre sanctioned an additional borrowing space to the state government on account of the reforms it initiated in the power sector.
The government will be entitled to an additional borrowing of Rs 8,323 crore, said a statement issued by the Department of Expenditure under the Union Finance Ministry on Wednesday. The sanction has come as a huge relief to the state which was plunged into crisis owing to the cut in its Net Borrowing Ceiling (NBC) on Open Market Borrowings (OMBs) in 2022-23 and 2023-24 financial years.
As per the provisions of Centre’s UDAY (Ujwal DISCOM Assurance Yojana) guidelines and the conditions for availing the additional borrowing space, states are entitled to an additional borrowing space of 0.5% of GSDP linked to their performance in the power sector. Under this, states have to take over the losses of power entities in a predetermined percentage.
The percentage fixed for Kerala in 2022-23 and 2023-24 was 60% and 75%, respectively. In case Kerala fails to take over the losses, the corresponding amount will be adjusted against the NBC.
Kerala scored 86 in power reforms in FY23
The state’s application for NBC should accompany information on losses incurred by power entities along with their audited financial statements, the number of losses taken over along with documentary proof such as a provision in the state’s budget, government order, payment document of losses taken over by the state, including bank statement.
Kerala has to submit a scoresheet of 100 with points against specific parameters like the number of unmetered connections, DBT payment of power subsidy to the agriculture sector, modernisation activities and distribution losses. In 2022-23, the state scored about 86 points, said a source in KSEB.
The Finance Commission fixes the percentage of OMBs states can avail. For 2023-24, the 15th FC fixed this as 3% of GSDP for all states. It was 3.5% last year. To account for off-budget borrowings availed by public sector enterprises, Kerala’s normal NBC, Rs 32,442 crore, was slashed to Rs 20,521 crore in 2023-24. Claiming the cut was higher than OBBs availed by the PSUs, the state government had taken up the matter with the Centre.