Opinion - Editorials

Time for targeting subsidised power

Prime Minister Manmohan Singh's public disapproval of the practice of giving free power to farmers has triggered a fresh debate on the need, viability, and future of this scheme, which is being implemented in some States. Communist Party of India (Marxist) general secretary Prakash Karat came up immediately with a nuanced response. His party did not advocate free power in States where it was in government. However, its view was that where power was being supplied free to the farm sector, there should be no sudden withdrawal of the scheme for all categories of consumers. In such cases, a graded scheme would be in order: free power should be given only to poor and marginal farmers, and landlords and others having access to resources should be made to pay for the power they use. Finance Minister P. Chidambaram finds in all this nothing out of tune; in his opinion, there is no question about the direction of reforms, only a difference over the pace of its implementation. It is true that reform in the power sector has lagged behind reform in other key areas. This reality is being cited as one reason for the slow pace of capacity addition to power generation and big shortfalls in achieving Plan targets.

Tamil Nadu, Andhra Pradesh, and Maharashtra are three major States that provide free or subsidised power to the farm sector. They came under pressure from multilateral lending agencies to implement `power sector reform' — a euphemism for scrapping the free power scheme. The current debate focusses attention on the Electricity Act and how it deals with, or impinges on, the sensitive issue. Although the Act, which evoked major protest when it was shepherded through Parliament in 2003, does not expressly prohibit supply of free power, it makes it mandatory for the State Governments to reimburse the State Electricity Boards the cost of providing that subsidy. That is one good reason for States to target their subsidies to poor and marginal farmers. The Electricity Act has also stipulated that State Electricity Boards should go in for 100 per cent metering of connections to rule out power theft and minimise transmission losses. However, what has caused concern to the States and to the employees of the Electricity Boards is the provision in the Act to unbundle the functions of the Electricity Board — generation, transmission, and distribution. The ostensible purpose is to end monopoly and encourage competition so that consumers benefit. It is this provision that has set off fears of ultimate privatisation. Hearteningly, many State Electricity Boards seem to be turning the corner, with the Electricity Regulatory Authority ensuring that the power tariff is reviewed and revised periodically to make it viable. The real solution is to de-politicise the power sector and bring in an economically viable but socially sympathetic policy, with built-in flexibility to accommodate State-specific circumstances.

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