Flawed power policy

The Punjab Government spends Rs 6,364 crore a year on subsidising power with far-reaching adverse consequences. The proposed release of 1.2 lakh new tubewell connections will further raise the power subsidy by Rs 550 crore. Because of the whitefly attack more farmers have turned to paddy cultivation this year. Free power not only leads to its misuse and over-exploitation of groundwater but also raises the cost of power for industry, making it less competitive. A small concession announced on Wednesday is not good enough. Behind the Badals’ largess of free power lie a bankrupt treasury and a damaged power institution, PSPCL, which now is set to incur a loss of Rs 2,000 crore through a ruinously devised agreement to purchase power from private producers.  

Because of financial constraints, Punjab departments and institutions often fail to clear their power dues. Theft of power and transmission losses are put in the free power category. In 2015 it was found that for three years PSPCL had fudged figures and faked profits to claim higher power subsidy from the state government. On its part, the Punjab Government delays subsidy payments or makes adjustments in books, leaving PSPCL in heavy debt. On September 30, 2015, the debt stood at Rs 20,837 crore. If the state government takes over the debt, a central bailout is available under a scheme called ‘Uday’.

Common sense says the state should buy power at the cheapest possible rates. Punjab has an unusual pact to buy power from private companies. The pact shuts the door on competition among power companies to cut costs, improve efficiency and offer the lowest possible rates. Assured payments, which mean guaranteed profits, to private companies make a mockery of the contract that has failed to safeguard the state’s economic interests. It is still possible to cut the losses, debt and subsidy if the government so desires. With the introduction of DTBs (direct transfer of benefits), power and other subsidies can be limited to the needy. But the poll-bound political leadership remains in a self-congratulatory mood and refuses to recognise the massive damage its flawed policies have done to Punjab’s water, power and financial resources.