The Indian Government has announced that it will provide incentives worth INR1,400bn (US$17.1bn) to Indian States to accelerate power sector reforms in 2023 and 2024. The primary objectives of granting financial incentives for undertaking power sector reforms are to improve operational and economic efficiency within the sector and promote a sustained increase in paid electricity consumption.
To be eligible for the incentives, State governments must undertake a set of mandatory reforms and meet stipulated performance benchmarks. They must notably implement an assumption of responsibility for losses of public sector power distribution companies (DISCOMs) by the State government, as well as enact transparency in the reporting of financial affairs of power sector including payment of subsidies and recording of liabilities of Governments to DISCOMs. Upon completion of these reforms, the incentive amount granted by the central government may range from 0.25% to 0.5% of the GDP, based on performance.
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