Free electricity bankrupting PSPCL

Submitted by VK Gupta on Tue, 06/12/2011 - 6:18am

Free electricity bankrupting power corporation
Jangveer Singh
Tribune News Service

Chandigarh, December 5
Free power bankrupted the erstwhile Punjab State Electricity Board (PSEB). It may well do the same to Punjab State Power Corporation Limited (PSPCL). In the race for competitive populism, the power subsidy in the state net continues to rise. With landless labourers also covered under subsidised power, nearly 35 per cent consumers are being given subsidised power in Punjab.

The Cabinet has approved 100 units per month free power to landless labourers, bringing another five lakh persons under this facility. Nine lakh SC and below poverty line (BPL) families are being provided 100 units of power free per month. Ten lakh agriculture consumers enjoy free power for their agricultural pump sets.

This has resulted in a huge subsidy bill that the government has to pay each month to the electricity utility. Free power to the agriculture sector and to SC and BPL families costs the state Rs 349 crore per month. Free power to landless labourers will cost it Rs 150 crore per annum.

The state is virtually robbing its own electricity utility by refusing to pay it full subsidy in cash as decreed by the State Power Regulatory Commission. The government has made paper adjustments of more than Rs 4,000 crore against outstanding loans in the past four years. The liability of bonds worth Rs 980 crore issued by the government has also been placed on the power utility.

While the government paid PSPCL Rs 249 crore on account of subsidy after deducting electricity duty for the subsidy due for October, it took back Rs 140 crore from the corporation on account of electricity duty.

Paper adjustment of subsidy as well as irregular payments are leading to a financial crisis in the PSPCL which is forced to go in for short-term borrowings to purchase power. These borrowings are invariably disallowed by the regulatory commission, leading it into a debt trap. The PSPCL faces a cumulative loss of Rs 11,000 crore and is finding it increasingly difficult to borrow money with public sector banks refusing loans.

Despite the situation, there is no recovery plan in sight. There is a feeling that the free power facility started by the SAD-BJP government in 1997 is here to stay. Even the previous Congress government led by Capt Amarinder Singh succumbed to populism and resumed the free power facility after doing away with it on assuming power in 2002. The BJP and former Finance Minister Manpreet Singh Badal had spoken out against free power, but to no avail.

In this race for populist schemes, the government seems to be impervious to the environmental crisis looming over the state. Free power has led to an increase in the number of pump sets (11.5 lakh). In 2000 there were only 7.7 lakh pump sets. As many as 105 of the 140 blocks in Punjab are in the red zone with the ground water going down steadily.

The government has failed to come out with any incentive for the optimum use of tube wells or create conditions to make its oft-repeated call for diversification succeed.

News Analysis

Free power to agriculture sector and SC and BPL families costs the state Rs 349 cr a month
Now free power to landless labourers will cost govt around Rs 150 crore per annum