States will have to agree to take over the future losses of state power distribution companies in a graded manner to be eligible for additional borrowing space of 0.50% of GSDP for four years.
In case the states commit but fail, the losses not taken over will be treated as state’ fiscal deficit and their borrowing limit will reduce proportionately. As per the guidelines issued by the finance ministry, states cannot renege on power purchase contracts, cannot have unpaid subsidies to discoms, will have to reduce operational and financial losses, and will have to reduce industrial tariffs.
