Punjab should rationalise subsidies
Powerful’ Punjab should rationalise subsidies
rajeev ranjan Roy

Chandigarh

It is good to be a ‘powerful’ state, which Punjab is set to become by 2013 when a number of power projects would get operational. The state has suffered a lot on account of power crunch, which saw the flight of industries from the state to neighbouring Himachal Pradesh. In Punjab, subsidies are not only considered, but are also utilised as effective tools to garner political support. It remains to be seen if Finance Minister Parminder Singh Dhindsa will dare generate revenue by reducing power subsidies. Prof Lakhwinder Singh Gill, a senior Economist with Punjabi University, Patiala, feels that the policy of subsidies needs to be rationalised. “The benefit of subsidy should be restricted to the needy. It should not be doled out as a freebee,” added Prof Gill.

As per a rough estimate, Punjab needs nearly 9000 megawatt of power against the state’s own existing generation and procurement of around 6900 megawatt. What really disturbs the whole fiscal calculation of the state is the huge gap between the purchase and the sale of power. As per an assessment of Planning Commission, about 40 per cent energy is purchased and the average bulk purchase price is higher than the average tariff of Rs 2.67 per unit. “Power is being purchased at around Rs 6.50 per unit. In view of the high purchase cost, the losses are mounting over the year,” says a senior functionary of Planning Commission. Punjab’s financial loss arising out of power subsidy is around Rs 5,000 crore per annum. As per the assessment of Planning Commission, all major on-going power projects would be partly or fully operational in 2013. Almost 32 per cent power in Punjab is consumed by farmers. Producing more power would certainly have the requisite impact on the state’s overall economic health, which is moving towards resurgence, with the growth rate hovering above and around 8 per cent. The thermal power project in Talwandi Sabo, with total capacity of 1980 megawatt, is likely to be operational with the commissioning of first unit scheduled for September 2012. It is coming up in an area of 2113 acres.

Similarly, the first unit of Goindwal Sahib thermal plant is to be operational by March 2013, and that of Rajpura plant by December 2013. Chief Minister Parkash Singh Badal is of the view that once the state becomes power surplus, the problem arising out of subsidy would be solved. His officers, however, hold a different view, saying that heavy subsidy on power to the farmers would remain a bane if not rationalised. “Since the state’s fiscal position is not so good, how to make the fiscal deficit of Rs 5000 crore emerging out of power subsidy remains a matter of concern,” said a senior government official, who did not wish to be identified.

The central auditing agency—Comptroller and Auditor General (CAG)—has, however, expressed certain reservations about power scenario in Punjab. It says that by 2012, Punjab will face a deficit of 5,361 megawatt. CAG observes: “Punjab is perennially in power shortage, and is unlikely to meet the national objective of power for all on demand by 2012.” The reasons pointed out by the auditing agency are--financial constraints, chronic delays, and indecisiveness in decision making, failure to undertake annual repair, maintenance, renovation and modernisation of power plants in time. To augment power capacity, CAG has recommended vigorous pursuance of capacity addition programmes by exploiting all conventional and non-conventional potential resources of energy so as to meet the national objective of power for all by 2012, rational deployment of the manpower and carrying out renovation and modernisation activity in time. The government has taken several measures to save power.