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Masked T&D losses till last year -- Karnataka may write off farm power subsidies

C. Shivkumar

BANGALORE, Nov. 26

The Karnataka Government has indicated that it would have to write off subsidies it had incurred on account of understating of the transmission and distribution losses made by the erstwhile State electricity board.

The subsidies to agriculture were charged as revenue expenditure in the past on the basis of agricultural load estimates provided by the SEB, the precursor of the current Karnataka Power Transmission Corporation Ltd. During the last three years alone, th is kind of expenditure had run up to about Rs 2,400 crore.

Barring 1999-2000, the transmission and distribution losses have been kept at a constant 18-19 per cent. Only in 1999-2000, the losses were escalated to 20.50 per cent. During these periods, the actual losses were indicated as agricultural consumption. B ased on this inflated agricultural consumption, subsidy support has been provided in the form of revenue expenditure, State Government sources said.

It is only this year, that the State Government has indicated a somewhat realistic level of the losses, mainly distribution and power thefts in the tariff filing with the Electricity Regulatory Commission (ERC). This indicates that agricultural consumpti on is much lower than what has been estimated. In fact, even the World Bank has contested the estimates provided by the State Government of an agricultural consumption of 6,500 units per irrigation pumpset.

Consequently, it was now becoming apparent that the agricultural power subsidies provided for in the past budgets of the State Government have been erroneously targeted, the sources said.

Given this kind of a situation, the sources said that the only alternative was to correct the situation after assessing the actual agricultural load in the State, they added. This kind of a load survey, they said, would reduce the demand for subsidies fr om the board, besides ensuring that the subsidies reached the intended beneficiaries.

However, on the past payouts that had been made, there was no way for recovering the losses. The State Government's Principal Energy Secretary, Mr K.P. Pandey, admitted this in as many words.

``Whom do we recover this amount from?,'' he said. ``What can be recovered is only the arrears of billing,'' he added. Consequently, other than writing off these losses, the State Government is left with little choice.

But what is now being done is to bring subsidy demands under the scrutiny of the ERC and the officials of the Energy Department. This was in order to ensure that only agricultural consumption was subsidised, and not losses as in the past, the sources sai d.

For the current financial year, the agricultural subsidy demand is to the extent of Rs 2,300 crore and what has been provided in the State budget for the current financial year is only Rs 892 crore. But the mandatory three per cent return on net assets, has been estimated on the basis of a subsidy input of Rs 2,300 crore.

The sources also said that the State Government was not in favour of meeting the entire subsidy bill in view of the tight fiscal situation. A partial escalation is likely to be permitted in the revised estimates for the current year, though this is unlik ely to be sufficient to meet the three per cent return.