The Hindu : Reforms, subsidy go hand in hand

Online edition of India's National Newspaper
Sunday, Mar 16, 2003

Southern States

Southern States - Tamil Nadu

Reforms, subsidy go hand in hand

By V. Jayanth

CHENNAI March 15. The Chief Minister, Jayalalithaa, today did a balancing act, trying to press ahead with economic and fiscal reforms, on the one hand, and continuing with the subsidy regime, on the other.

As the Tamil Nadu Electricity Regulatory Commission did away with free power supply for farmers and huts, she intervened to offer them direct cash support, keeping in mind the drought situation and the consequent economic stress on the vulnerable sections.

A senior official explained, "We have upheld the principle of any service having to be paid for, even while protecting the interests of the farmers and the poor. What the Chief Minister announced today is direct and targeted intervention".

Having empowered the TNERC to take over the role of regulator and authority to prescribe tariff, the Government and the TNEB could not take any political decision anymore.

In fact, in a submission to the TNERC on Monday, the Government made two things clear - that free power for farmers must continue but it was in no position to subsidise the TNEB for it.

However, given the political and economic realities, especially the failure of three successive crops in delta districts and no prospect of the next kuruvai crop either, no Government could be seen as taxing the farmers at this juncture.

With a united Opposition waiting for such an opportunity, the Chief Minister has devised a cash support scheme to come to the rescue of the farmers and hut dwellers, at least for now.

Officials noted that for a farmer having a 3-hp pumpset, the flat rate payable would be Rs. 750 a year, but he would get a Rs.1000-cash support anyway.

If the farmer had a 5-hp connection, the burden would be Rs. 1250, in which case, he would have to pay only Rs. 250 a year from his pocket.

`Tariff still the lowest'

Sources in the TNEB explained that the new tariff for the farm sector was still the lowest in the country.

In Andhra Pradesh, it was 20 paise a unit up to 2,500 units and 50 paise above that. The flat rate was fixed at Rs. 275 per hp per year for up to 3 hp; Rs. 425 for the 3-5 hp slab; Rs. 525 per hp for the 5-10 hp category and Rs. 625 for connections above 10 hp.

In Karnataka, it was 40 paise a unit plus Rs. 240 per hp per year for metered connections and Rs. 720 per hp for unmetered consumers. West Bengal had a different slab system for pumpsets up to 5 hp - Rs. 795 per hp per year, during the February-May season, Rs. 187 from June to September and Rs. 270 from October to January.

Similarly, for the domestic category, the lowest and the highest slabs in some of the States were: Andhra Pradesh Rs. 1.45 to Rs. 5.50 per unit; Karnataka Rs. 1.85 to 4.60: Kerala Rs. 1.10 to 5.45 and West Bengal Rs. 1.45 to 4.90.

Direct subsidy

The sources said the government subsidy of Rs. 250 crores per year, till now, was only "notional". Now it would be a cash subsidy, going directly to the consumer. It would work out to about Rs. 110 crores a year.

But the point Ms. Jayalalithaa tried to drive home in her statement announcing the cash subsidy was simple — the current fiscal crisis was a result of the previous regime's "neglect of fiscal reforms" and that the DMK Government also obtained financial assistance under the Accelerated Power Development Programme in March 2001, necessitating a memorandum of understanding to make the Regulatory Commission fully functional and to meter all consumers.

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