Opinion divided over state move to cut power subsidy

The decision of the Punjab government to cut down on subsidy amount to the Punjab State Power Corporation Limited (PSPCL) for free power to the agriculture sector and other consumer sections by Rs 360 crore is baffling.

In the budget proposed a fortnight ago, the government set aside Rs 5,300 crore to be given to the PSPCL for free power in the current financial year, which last year was Rs 5,660 crore.

The government and the power department say it is because of a fall in power consumption by tubewells, while experts call it twisting of the figures to project improvement in the fiscal health of the PSPCL. The reduction in the proposed subsidy bill is despite the fact that the number of tubewells in the state during the past one year has increased by 25,000, touching the 11.5-lakh mark and the power consumption has also increased as about 412.39 crore pending amount of 2012-13 and Rs 304.66 crore pending amount for 2011-12. After compiling of pending subsidies, the total subsidy, which the government owes the PSPCL by the end of the last financial year (as on March 31, 2014) is Rs 1,509 crore.

“In case no upward revision of tariff is allowed in the current financial year by the Punjab State Electricity Regulatory Commission (PSERC), the required subsidy amount payable by the government will be Rs 5,660 crore. If one adds the last year’s unpaid subsidy of 1,509 crore plus Rs 160 crore of interest thereon, the total power subsidy bill of the Punjab government will be Rs 7,329 crore.

In case there is a normal tariff hike of 8 to 10% this amount will rise further,” said a PSPCL official.

Out of power subsidy of Rs 5,660 crore for last year, Rs 4,700 crore is agriculture subsidy and about Rs 960 crore is for below poverty line and SC-BC consumers. “The government has not explained how Rs 5,300 crore committed by the Punjab government in its budget will be able to meet the subsidy requirement of more than Rs 7,300 crore,” said a top PSPCL official.

Power principal secretary Anirudh Tiwari attributes the reduction in the subsidy amount to the fall in power consumption of agriculture sector. On the other hand, a PSPCL engineer said, “The government has reduced the amount probably as the PSPCL had been claiming higher amount of subsidy by mixing transmission and distribution losses with the agriculture consumption.”