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A tussle between the finance and the power ministries has erupted over disbursement of funds for the Accelerated Power Development and Reforms Programme, which is the power ministry's key reforms tool. Even as the finance ministry has disbursed only a fraction of the allocation for the current fiscal, there is a dispute over the selection of a co-ordinating agency for the disbursement of funds.
While the finance ministry is pitching for appointing a financial institution like the Industrial Development Bank of India as the nodal agency to co-ordinate the release of funds to states for reforms, the power ministry wants one of its undertakings, like the Power Finance Corporation, to be given the mandate.
At present, the Central Electricity Authority has been co-ordinating the appraisal of projects on behalf of the power ministry, but it has no operational role in disbursal of funds.
The problem of delayed disbursement can, therefore, blunt the effectiveness of the reform tool.
The finance ministry has disbursed only Rs 426 crore from the Budget estimate of Rs 3,500 crore (Rs 35 billion) for the current fiscal. The power ministry has pitched for another Rs 1,700 crore (Rs 17 billion) to be given to states in this fiscal, which has still not been ratified by the finance ministry, with just two and a half months left for the financial year to end. Due to the differences betweeen the finance ministry and the power ministry, it is possible that the allocation under the reforms programme could be slashed in the revised estimates, as was done in the previous fiscal.
For 2001-02, the finance ministry had slashed the central assistance in the revised estimates to Rs 450 crore (Rs 4.5 billion), against the budgeted Rs 1,500 crore (Rs 15 billion).
The finance ministry feels that a financial institution should be made responsible for disbursements.
But according to some government officials involved in the exercise, instead of IDBI, this can also be done by roping in either the Power Finance Corporation or Rural Electrification Corporation, both of whom are qualified as non-banking financial companies.
Under the programme, the states have to adhere to a set of reform milestones prescribed by the power ministry for which they will be eligible for funding from the Centre.
This amount will be funded through a combination of grant and loan in the ratio of 50:50 for non-special category states and in the ratio of 90:10 for special category states.
While the loan component can be raised from any financial instutions, the grant portion under the programme is released by the finance ministry and routed through the power ministry, which approves reforms projects of states.