Free power bleeds Punjab’s coffers - Hindustan Times

Free power bleeds Punjab’s coffers

Hindustan Times | By, Chandigarh
Jul 16, 2014 08:12 AM IST

A whopping Rs 43,600 crore. That is the total amount the Punjab government and the state power utility will end up spending by March 2015 (since 1996-97) on free power to run agricultural tubewells.

A whopping Rs 43,600 crore. That is the total amount the Punjab government and the state power utility will end up spending by March 2015 (since 1996-97) on free power to run agricultural tubewells.

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This amount is sufficient to add power generation capacity of 8,700 MW (megawatts) – adequate to build 20 thermal plants like the one in Bathinda (440 MW) - and enough to service an estimated debt of Rs 40,000 crore on the state’s farmers.

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The dole has been continuing for the past more than 17 years, even though experts, farmers and power officials have repeatedly opposed the populist measure offered by successive state governments. From Rs 900 crore in 1996-97, the annual free power bill has reached Rs 6,000 crore in the current financial year, 2014-15.

From 1997 to 2001, the Punjab State Electricity Board (later unbundled) was paying for the state government’s free power scheme. Later, when the Punjab State Electricity Regulatory Commission (PSERC) came into existence, a system was started to bring on record the cost of free power consumption. As per the Electricity Act, 2003, the state government was supposed to give subsidy to the Punjab State Power Corporation Limited (PSPCL). Despite that, the state government kept making ‘on-paper adjustments’, which led to accumulated losses of Rs 1,300 crore and total loans of Rs 20,000 crore on the PSPCL, of which Rs 10,000 crore is the working capital loan.

During the fag-end of then Congress government in 1996, then chief minister Rajinder Kaur Bhattal announced free power for agricultural tubewells of farmers with land measuring five acres or less.

When Parkash Singh Badal took over as the CM of the Akali-BJP government in 1997, the dole was announced for tubewells of all sections of farmers.

The erstwhile PSEB’s slide towards bankruptcy began when from 1997-98 to 2001-02, the loss accrued was Rs 5,600 crore, for which the board took loans of Rs 2,500 crore. The profit-making board turned into a loss-making entity. During the Congress government tenure, free power was stopped from 2003 to 2006, but it was resumed at the fag-end of the regime.

Time and again, farm experts and economists have suggested discontinuing free power. At the Progressive Punjab Agriculture Summit in February, Dr GS Khush, a US-based plant breeder, made this suggestion, to which Badal said experts were free to advise him, but he would not stop free power.

Besides the expenditure on free power, the Punjab government is wasting 25-30% sub-soil water. About two-thirds of the state has been declared a ‘dark zone’ where the water level is depleting at an alarmingly fast pace. The water table in central Punjab has gone down by more than 20 metres in the past 10 to 15 years and the drop is continuing. Free power to tubewells is a major factor for the fall in groundwater level.

Economist Dr RS Shergill, professor emeritus, Panjab University, Chandigarh, pointed that as an estimated 16,000 crore gallons of water were used to grow foodgrains annually in the state. “Since Punjab is giving free power, this factor (water usage) is not considered by the Commission for Agriculture Costs and Pricing (CACP) while calculating the minimum support price (MSP) of wheat and paddy. Thus, the benefit is enjoyed by people of other states who consume foodgrains produced in Punjab.” Shergill has suggested utilising the expenditure on agricultural consumption on creating a development fund for the uplift of rural areas.


The PSERC has pointed out that the PSPCL is showing a fraction of transmission and distribution (T&D) losses under agricultural consumption. “The PSPCL claims higher agricultural consumption in an effort to bring down T&D losses,” said an expert in agriculture. The PSPCL shows T&D losses of 17 to 18%, even though the actual figure is 21% annually.

As per the PSERC’s findings, in 2010-11, government figures show 400 million units as excess agricultural consumption, 750 MUs in 2011-12 and 950 MUs in 2012-13. The total cost of the power for 2014-15 is Rs 800 crore. The PSERC is contemplating to deduct the excess consumption while calculating the power tariff for 2014-15.


Giving free power is like a crime as we are impoverishing resources of future generations. It is also free power is also a hurdle to crop diversification. The govt can distribute the power subsidy bill among the farmers rather than paying it to the PSPCL. SARDARA SINGH JOHL, farm economist.

The state is studying options to reduce the power subsidy bill by cutting wastage and giving farmers incentives to save electricity. Farmers will be encouraged to use power judiciously. The gains can be higher than what states such as Haryana are mopping up by charging farmers for power. PARMINDER SINGH DHINDSA, finance minister, Punjab.

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    Gurpreet Singh Nibber is an Assistant Editor with the Punjab bureau. He covers politics, agriculture, power sector, environment, Sikh religious affairs and the Punjabi diaspora.

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