2011: High subsidy hit Punjab power sector
FE / Agencies

Posted: Wednesday, Dec 28, 2011
Chandigarh: The sheen of the power sector, which plays a vital role in vote-bank politics in Punjab, was tarnished by a substantial hike in power tariffs, the ballooning power subsidy and strident farmers protests over land acquisition for a new power project in 2011.

Despite being a corporatised entity after unbundling of the erstwhile Punjab State Electricity Board, power generation-cum-distribution company Punjab State Power Corporation Limited (PSPCL) continued to experience high transmission and distribution losses and a "mammoth" gap in the revenue requirement to meet its costs.

Having earned the wrath of several quarters, including farmers and opposition political parties, for "insufficient" power supply over the past several years, PSPCL has geared up to remove the shortcomings in the New Year ahead of Assembly polls. The ruling SAD-BJP combine faces elections on January 30 next year.

The power company pulled out all stops to ensure uninterrupted power supply, especially to farmers for the paddy season, and arranged 5,700 million units from several sources, including through power purchase agreements.

The states and organisations with which the state entered into agreements for power included Power Trading Corporation (PTC), NTPC and National Vidyut Prasaran Nigam (NVPN). It also entered into agreements with Rajasthan, Madhya Pradesh, Maharashtra and Delhi.

To improve its finances, the Punjab State Regulatory Commission (PSERC) announced a power tariff hike of 9.19 per cent in May, which was the second highest jump in the last four years.

However, PSERC deliberately chose not to pass on the entire burden of the hike to power consumers despite power utilities, including Punjab State Transmission Corporation Limited (PSTCL), facing a huge revenue gap of Rs 2,651.51 crore.

As doling out of subsidised power has almost become a norm for ruling political parties in Punjab, free power to farmers and SC and BPL categories by the state government resulted in an additional financial outgo of Rs 1,100 crore for the exchequer, taking the total to Rs 4,257 crore in 2011-12 and putting a strain on financial resources of the state.

"If Punjab stops giving free power, the state could turn into a revenue-surplus state as it would have a substantial amount of resources to spend on development projects," said an economist.

Despite directives by the power regulator, the power utility continued to suffer Transmission and Distribution (T&D) losses of over 20 per cent, continuing the trend for a sixth year.

The SAD-BJP government's efforts to add new power generation capacities experienced a setback when farmers of Gobindpura village, in Mansa district, refused to part with close to 100 acres of land for setting up the proposed 1,320-MW Peona thermal plant in the private sector in August.

Finally, yielding to pressure, the state government decided to give back possession of 91 acres of land to agitating farmers in an apparent bid to buy peace with the farming community ahead of Assembly elections.