Centre’s ‘diktat’ may end Punjab’s free power

Continuing free power to consumers may soon become an uphill task for Punjab as the Centre has devised a stringent three-option privatisation formula aimed at tightening the noose around states failing to clear their electricity subsidy bills.

Punjab offers heavy power subsidy across different categories. While farmers get free electricity to operate tubewells, domestic consumers are allowed 300 units of free power per month. The state’s annual farm subsidy burden has surged nearly 17 times from Rs 604.57 crore in 1997-98 to Rs 10,000 crore in 2025-26. The total estimated subsidy is around Rs 20,500 crore if other categories are included.

Power sector expert and All India Power Engineers Federation spokesperson VK Gupta said the first option required the state government to sell 51 per cent stake in electricity distribution corporations and operate them under a public-private partnership model.

The second option mandates a 26 per cent stake sale in electricity distribution corporations along with management control to a private company.

Under the third option, the state that wanted to avoid privatisation had to register its electricity distribution companies with the SEBI and the stock exchange, said Gupta.

The proposal on the three options and the suspension of grants was shared by the Centre with seven states (Punjab was not among them) at a recent ministerial-level meeting.

Punjab farmers, who use free electricity to run tubewells for irrigation, have been opposing any move by the state government to allow private players to take control of the power sector.

Farm union leaders have also opposed the Electricity Amendment Bill-2025, which proposes to revise electricity tariff and give private companies a say in the power sector. The unions alleged that the Bill was aimed at benefiting private companies at the expense of the public.

Electricity is on the concurrent list in the eighth schedule of the Constitution, meaning the Centre and state governments have equal authority in deciding matters.

Gupta said in such a situation, how could the decision on the privatisation of power be imposed on all states based on the opinion of seven selected states, including Uttar Pradesh, Maharashtra, Madhya Pradesh, Rajasthan, Haryana, Andhra Pradesh and Tamil Nadu. “It appears that a nationwide campaign for privatization is being aggressively pushed forward”, he said.

India currently has over 60 discoms (power distribution companies), of which 16 are privately run in states and union territories such as Gujarat, Delhi, Mumbai, Odisha, West Bengal and Dadra & Nagar Haveli.