Free power may not be an option with states

Union Power Minister R K Singh has said the Centre can now double down on states not to offer free power to segments of consumers. “We propose to bring in an amendment to the Electricity Act in consultation with state governments to make this possible,” he said. SUBHOMOY BHATTACHARJEE writes

Union Power Minister R K Singh has said the Centre can now double down on states not to offer free power to segments of consumers.

He said the Centre would be able to do so because it had been able to reach electricity to all census villages in the country ahead of its target.“We propose to bring in an amendment to the Electricity Act in consultation with state governments to make this possible,” the minister told Business Standard.

According to him, the states should not burden their purse with unmeasured power subsidies. Rather, they should shift to direct-benefit-transfer schemes for consumers they wish to subsidise. “Those consumers should pay for the full metered consumption of electricity and then be paid by the state,” the minister said. This, he said, would encourage responsible consumption.

The minister’s comments are significant because free power is a political hot potato. States like Andhra Pradesh have made a commitment to their farmers with landholdings of less than 2.5 acres that they will not be charged for power consumption. Punjab too offers free power to farmers and several more states have baulked at metering electricity for them, fearing adverse political impacts.

Indian power reforms have for decades come unstuck on this challenge because close to 50 per cent of the country’s working population depend on the agriculture sector.

Singh said direct benefit transfers would cap the states’ fiscal drain and enable them to focus on providing quality power. The second stage of the Centre’s power programme envisages reaching electricity connection to each of the 35 million families that do not have one. The target for this set by Singh’s ministry is December 31 this year, but it would need commensurate investment by states too.

The 15th Finance Commission, constituted in November last year, to decide on allocations of resources between Centre and the states, could penalise the latter for offering free power. They could be classified as populist under the terms of reference of the Commission.

Singh’s option could reduce that source of conflict.