The Hindu Business Line : Free power spree... <br>Who's counting the costs?

It is also a paradox that even as an Indian has patented waste to energy process technology way back in 1989 and is implementing a project based on this in Malaysia successfully, the State level leaders have no compunction to pour power down the drain.

New Delhi , June 12

The reported move by the Punjab Government headed by the Chief Minister, Captain Amarinder Singh, to provide up to 200 units of power free for all the Scheduled Caste consumers presumably with an eye on brightening the poll prospects of the Congress party for the next year Assembly election has brought to light the dichotomy in the Central leadership's keenness to ensure success of economic reforms and the blunting of that keenness by the State leaders.

Populist policies

The latter have no qualms in merrily resorting to populist policies to placate voters despite the cost and curse such a course of action entails to the economy, hobbled by high cost of power.

If the supporting Left party allies opposed the latest price hike of petrol and diesel on the ground that it would impact the general price level, the unconcealed tokenism to offer substantial units of power free to people on caste basis by the outfit of the principal ruling party in the Centre is a risky gambit.

It flouts all cannons of fundamental economics that might only weaken the ongoing power sector reform which itself is moving at a glacial pace.

The Andhra Pradesh Chief Minister Dr Rajashkehar Reddy also announced free supply of power to farmers soon after assuming office in 2004.

Wasted subsidies

While the ostentatious reason for this gratuitous largesse from the State is to help extend a modicum of relief to the dreary battle for livelihood these sections of population must perforce wage, the fact remains that no cost benefit study has ever been done to assess the impact of such subsidies as most of them end up in waste.

It is also a paradox that even as an Indian has patented waste to energy (WTE) process technology way back in 1989 and is implementing a project based on this in Malaysia successfully, the State level leaders have no compunction to pour power down the drain.

It might be noted that the Centre has notified tariff policy under which the extent of subsidy for different categories of consumers could be decided by the State Government, keeping in view various aspects. It lays due emphasis on giving subsidy in transparent and targeted fashion.

Cross subsidies for different consumers to be reduced and brought within the range of plus/minus 20 per cent of average of the supply by the end of the year 2010-11.

In a written reply to a query in the Lok Sabha, the Minister of Power, Mr Sushilkumar Shinde, has conceded that the provision of free electricity is not desirable as it encourages wasteful consumption of electricity.

Besides, in most cases, lowering of water table is, in turn, creating avoidable problem of water shortages for irrigation and drinking water for posterity.

Power costs

The estimated expenditure per annum for different category of power supply range from Rs 102.35 crore in Kerala (domestic load up to 500 W with monthly consumption of up to 20 units); Rs 112.18 crore in Karnataka (economically weaker section where consumption is up to 18 units per month); Rs 208.04 crore in Madhya Pradesh (agricultural for SC/ST consumers up to 5 HP); Rs 877.58 crore in Andhra Pradesh; Rs 1,166 crore in Tamil Nadu (agriculture and hut categories and a portion of tariff for domestic category) and Rs 1,548 crore in Punjab (agricultural pump set consumers and SC domestic consumers up to 300 W and 50 units per month).

Point to ponder

The mounting cost of subsidy on power sector apart, a point to ponder is that as reported by the State power utilities, 69.87 per cent of the power available to them for sale was billed during 2004-05, implying that as much as 30.13 per cent of the energy available for sale was lost, which includes losses due to technical reasons, theft and pilferage.

The details gleaned by the Power Finance Corporation show the overall commercial losses (without subsidy) in 2004-05 amounted to a whopping Rs 22,129 crore.

Current need

If power sector in the country is not attracting the volume of investment either domestic or foreign, it is high time the State governments restrained themselves from offering free lunches and the Centre pulled up renegades even as the latter makes constant endeavour to level the playing field for private entrants into generation, transmission and distribution of power either through public-private partnership or through generous tax brakes on infrastructure projects.