Explainer: Why power sector subsidy is eating into Punjab's coffers

As the successive governments continue to swallow the bitter subsidy pill, the concession for the power sector alone now accounts for 10 per cent of Punjab’s budget. In the coming fiscal, Punjab expects to supply over Rs 10,000-crore worth of power to the agriculture sector in addition to around Rs 7,600 crore for domestic consumers.

With the government advancing paddy sowing to June 1 and the IMD predicting more heatwave days, the power demand is projected to increase by 8 per cent this year.

The maximum power demand is likely to cross 17,500 MW in the paddy season as more electricity will be needed to run tube-wells for irrigation.

History

Rajinder Kaur Bhattal, who served as the Chief Minister for a few months, first instituted an electricity subsidy for farmers in January 1997. She had promised free electricity to farmers with up to seven acres of land. Farmers with greater landholdings were required to pay Rs 50 per horsepower for motors to pump out groundwater. The subsidy bill amounted to Rs 604.57 crore in 1997-98.

Later, Parkash Singh Badal, who took over on February 12, 1997, promised power subsidy to all farmers. When Capt Amarinder Singh became the CM in 2002, he imposed a fee on farm motors (Rs 60 per horsepower), claiming depleted funds. However, due to political pressure, he was forced to reinstate free power in November 2005.

In 2005-06, the subsidy bill surpassed Rs 1,000 crore for the first time, reaching Rs 1,435 crore. That year, the farm subsidy alone totalled Rs 1,385 crore. In 2007-08, the overall subsidies exceeded Rs 2,000 crore with the bill rising to Rs 2,848 crore. Of this amount, Rs 2,284 crore was the cost of free electricity to the farm sector.

In 2009-10, the electricity subsidy bill rose to Rs 3,144 crore, with the agriculture sector alone accounting for Rs 2,804 crore. It was Rs 4,188 crore in 2011-12, while the free farm power bill was Rs 3,879 crore. In 2012-13, the overall subsidy was Rs 5,059 crore, with agriculture garnering Rs 4,787 crore of funds.

At present, the power subsidy figure is likely to touch Rs 20,500 crore. Out of this, nearly Rs 10,000 crore is for the farming sector, Rs 2,893 crore for the industry and Rs 7,614 crore for the domestic sector.

Politics over ‘power’

Successive governments have failed to take a stern view of the rising power subsidy bill and falling groundwater as paddy continues to burn a hole in government pockets. Bowing to farm unions, political parties announce in advance that once voted to power “free power to farmers will continue”. Be it the Congress government or the SAD-BJP coalition, power subsidy has became a norm.

The ruling AAP administration went a step further, announcing and providing free 300 units to domestic users.

Rising debt

According to Kesar Singh Bhangoo, former professor of economics and ex-Dean, Punjabi University, Patiala, the average state debt from 2012 to 2022 rose roughly by Rs 20,000 crore per annum. “In the past three years, it is rising at the rate of approximately Rs 44,000 crore per annum which means that the total debt on Punjab would reach nearly Rs 5 lakh crore by 2027. Such a huge debt will affect investments which will ultimately lead to a rise in unemployment,” said the economist.

Despite the high subsidies, power theft of Rs 2,000 crore is reported per year, while the PSPCL is taking loans to meet expenditures and unable to fill the majority of the vacancies.