Montek-led panel recommends rationalisation of power subsidy
CHANDIGARH : An expert panel headed by former deputy chairman of Planning Commission Montek Singh Ahluwalia has strongly backed power sector reforms, including rationalisation of subsidy, suggested by the 15th Finance Commission to improve the fiscal health of Punjab.
The expert group, in its final report on “Medium and Long Term Post-Covid Economic Strategy for Punjab” submitted recently, has recommended that the state government should undertake power sector reforms along the lines indicated by the Finance Commission (FC). “Political economy considerations are extremely important, but it is also necessary to recognise that unsustainable fiscal practices will harm future generations and cannot be continued indefinitely,” it said, while making the recommendation.
The Montek panel, which included leading experts on agriculture, economy and industry, said one way of reducing the burden of the power subsidy on the state budget might be to include the economic cost of power in the cost of production of agricultural products and raise the MSP accordingly. “If this is done, the subsidy would be paid for as part of the food subsidy,” it said. The expert group set up by the present Congress government in 2020 was to give its recommended by December, but the term was extended till June 30.
Subsidy bill 18% of revenue receipts
The expert group said the FC had drawn attention to the state’s total subsidy bill that is 18% of the total revenue receipts, the highest among the states in its class, and the overwhelming component of this subsidy is in the power sector. “The FC also pointed out that free power is leading to the second highest discharge of groundwater through irrigation (34.1 billion cubic metres in 2017) and the estimated groundwater availability for future use is negative,” it said, throwing its weight behind the FC’s recommendations.
In its report to the Union government in February 2021, the 15th Finance Commission led by retired bureaucrat NK Singh had suggested additional annual borrowing of 0.5% of the gross state domestic product (GSDP) to states based on the improvement in metered consumption that yields revenues, reduction in tariff subsidy as a per cent of revenue and increase in direct cash component of subsidy and reduction in aggregate technical & commercial (AT&C) losses.
The Montek panel, while stating that a large number of its recommendations made in the first report have been accepted, reiterated its earlier suggestion that Punjab State Power Corporation Limited (PSPCL) should shut down two thermal plans that produce power at a much higher cost than available alternatives available once these plants have completed their economic life span.
Preparing for 3rd Covid wave
The expert group, which also suggested steps to deal with the third Covid wave, said the main lessons of the past year are that decentralised planning, delivery and monitoring are needed at the district level with the district collector and the district health officer mobilising resources and coordinating operations.
“The state government should identify areas with high vaccine hesitancy and launch a campaign to explain the safety and efficacy of vaccines,” it said.
Fast-tracking establishment of health and wellness centres in rural areas, setting up of functional lab and diagnostic labs at block level and increase in budget by 20% annually for five years are its other suggestions for health sector.
Though the expert panel had made 130 suggestions in its first report for revitalising industry, several of them, including decentralisation of powers of PSIEC, one-time settlement offer for all pending dues, tagging each khasra to make the process of use of land for industrial purpose less tedious and incentives to private sector for setting up new industrial townships, have not been accepted by the state government.
The panel again recommended that the state government should pay employees on a par with the central staff, refrain from fresh recruitment in police, approach the Centre for increase in ceiling for professional tax.