Power subsidy hurting state economy: Experts

Ruchika M Khanna

Tribune News Service

Chandigarh, March 5

The huge power subsidy bill of Punjab, estimated at around Rs 5,109 crore for this fiscal, has once again come into focus. Not only has the 14th Finance Commission rejected the state’s claim for the revenue-deficit grant because it included the power subsidy in state’s revenue receipts, but the industry has also lambasted the government for giving power subsidy to the farm sector.

A seminar organised by the CII-Northern Region on reviving growth momentum in the state here this evening saw participation by industry leaders, government functionaries and politicians. The stage for the discussion was set by The Tribune Editor-in-Chief Raj Chengappa, the moderator, when he asked the panelists, including Punjab Finance Minister Parminder Singh Dhindsa, to clear the air regarding the gap in perception of the state being bankrupt and lagging on most growth indicators and the reality. He also raised the issue of rampant drug addiction in the state and the low employability factor of the Punjab youth because of poor skill development initiatives.

The industry criticised the state government for retaining power subsidy. Free power supply led to abuse of this provision, with reports of erratic power supply pouring in, it said.

Sunil Kant Munjal, former president of the CII and chairman of Hero Corporate Services, said that in a survey conducted earlier, farmers themselves said they did not want free power; rather they wanted quality and assured power supply.

“Giving free power to farmers is negative for all—farmers as well as other consumers. We are hurting ourselves. Instead of giving freebies, the government should strive to make Punjab a part of global value chain by turning agriculture into an enterprise. That is the way to the next leap in state’s growth,” he added.

Manish Tewari, former Union minister, said in order to get back the top position in the country, Punjab must take politically difficult measures, including cutting down power subsidy. “The Congress government did that in 2002. It’s a tough call, but today’s situation demands it. We have to live within our means. The government needs funds to carry on development. A bipartisan consensus is needed to take strict fiscal measures, especially because the tax base in the state is narrow while tax evasion is rampant,” he said.

Punjab Finance Minister Parminder Singh Dhindsa, however, defended the government on the issue of power subsidy. “We must not forget that this is an indirect agriculture subsidy. No one talks when other states give fiscal incentives to the industry. But we have to remember that agriculturists need to be protected by incentivising them as the agricultural production has plateaued. We have tried to cap the subsidy. I agree it is a political decision, but it is important. Though the 14th Finance Commission has removed us from the category of debt-stressed states by including power subsidy in revenue receipts and then maintaining that we will soon be revenue surplus, I disagree with the theory. We could have got additional Rs 3,000 crore revenue-deficit grant, if this was not done,” he said.

As members of the industry questioned him on delay in release of VAT refunds, lack of incentives under the new industrial policy, poor cash flow into the state, Dhindsa said the fiscal situation was not all that grim and the government was sensitive to these concerns. It was trying to remove these, he added. He also promised that the Budget for the coming fiscal would have incentives for micro and small industrial units.

Dr Parmod Kumar, who heads the Punjab Governance Reforms Commission, said Punjab needed a paradigm shift in its prescription for all problems that stalled growth. He said systems in the government set-up had collapsed and the dole syndrome needed to be corrected. He also spoke about farmers having the first right over the use of their land. He raised the issue of Chandigarh being transferred to Punjab. The revenue generated in Chandigarh should be shared between Punjab and Haryana till that was not done, he said.