Declining power rates worsen state’s financial woes
Rakesh Lohumi
Tribune News Service

Shimla, April 27
Declining rates of power are adding to the woes of the hill state that is heading for tough times on the financial front because of lack of buoyancy in tax collections due to the economic slowdown.

It is going to be a difficult year as the state has to absorb a financial shock of over Rs 2,500 crore on account of pay revision. The state had done reasonably well in achieving the targets set under the Fiscal Responsibility and Budget Management Act over the past three years mainly due to buoyancy in VAT collection and unusual increase in non-tax revenue on account of sale of power.

With the economic slowdown affecting the resource position significantly and the expenditure set to take quantum leap due to the impending pay revision, the state is in for a tough time on the financial front in 2009-10. The revenue from the power sector, which increased from Rs 53 crore in 2003-4 to over Rs 1,300 crore in 2007-08, came down to Rs 1,255 crore during the last financial year.

The sale price of power came down to Rs 7.01 per unit last year from Rs 7.15 per unit in the previous year. This year, the neighbouring states that procure bulk of the power have quoted a rate of Rs 6.10 per unit, but government has not accepted the offer and negotiations were on to get higher rate. While the finance department expects the rates to soften up in due course, it is not willing to accept a rate of less than Rs 6.65 per unit for the current year.

The impact of the economic slowdown started affecting the revenue collection towards the end of the last financial year. Last year, tax collections fell short of target by about Rs 50 crore.

The annual expenditure on salaries will go up from Rs 3,000 crore last year to Rs 4,351 crore after pay revision and the pension liability will swell from Rs 1,200 crore to Rs 1,400 crore. The state is hoping that the inflation remains in control so that it does not have to pay much by way of additional dearness allowance