27 states providing power subsidy, MP, Rajasthan and Karnataka top list

Updated on Aug 08, 2022 05:01 AM IST

Delhi has seen an increase of 85% in its subsidy expenditure between 2018-19 and 2020-21, from ₹1,699 crore in 2018-19 to ₹3,149 crore, the second highest among all provinces, an analysis of three-year data show.

India has been battling a severe coal crisis, resulting in critical stocks at domestic thermal power plants. (PTI)
India has been battling a severe coal crisis, resulting in critical stocks at domestic thermal power plants. (PTI)
By, New Delhi

As many as 27 states and Union territories out of 36 are providing subsidised electricity to consumers, with at least 1.32 trillion spent nationwide in the 2020-21 financial year alone, power ministry data show. Madhya Pradesh, Rajasthan and Karnataka footed the highest power subsidy bill, accounting for 48,248 crore or 36.4%.

Delhi has seen an increase of 85% in its subsidy expenditure between 2018-19 and 2020-21, from 1,699 crore in 2018-19 to 3,149 crore, the second highest among all provinces, an analysis of three-year data show. Manipur saw the biggest jump of 124% in power subsidies in these three years, although the increase was from 120 crore to 269 crore.

The data assumes significance as the Supreme Court is hearing a public interest litigation that wants political parties to be deregistered and their election symbols seized for offering “irrational freebies” ahead of polls. The top court on Wednesday had observed that no political party is likely to want a debate in Parliament on freebies since all want it to continue, even as the Union government termed such hand outs the “road to an economic disaster” and urged the Election Commission of India to devise ways to deal with them.

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Prime Minister Narendra Modi on Saturday asked the states to clear dues to power utilities amounting to 2.5 trillion, and termed the culture of subsidies as “a serious disorder” in Indian politics.

“People will be surprised to know that different states have outstanding dues of over 1 lakh crore. They have to give this money to power gencos (generation companies). Power distribution companies (discoms) are owed more than 60,000 crore. These companies are unable to get even the money committed for subsidy on electricity in different states. This arrear is also more than 75,000 crore,” the Prime Minister had said.

Madhya Pradesh, ruled by the Bharatiya Janata Party (BJP), has spent 47,932 crore between 2018-19 and 2020-21. This is only going to increase now as the state government on May 24 announced it will set aside an additional 16,424 crore on account of giving power subsidies to farmers. The state already has a 5,582 crore subsidy scheme for domestic consumers.

“If you see Madhya Pradesh alone, its tariff subsidy amount booked in 2020-21 was 19,595 crore. In 2022-23, with their latest announcements, the state’s budget allocation on electricity subsidy is going to climb over 22,800 crore,” a power ministry official said, requesting anonymity.

As on Thursday, discoms in Madhya Pradesh had an outstanding due of 8,190 crore to generation companies, according to the Union power ministry’s PRAAPTI portal. PRAAPTI is short for Payment Ratification And Analysis in Power Procurement for bringing Transparency in Invoicing of Generators.

State power department principal secretary Sanjay Dubey said: “We are already supporting the Centre on this. There is a due of more than 8,000 crore from 2019-20 and we are paying it under late payment surcharge. The first instalment has already been paid. We have cleared all the dues of last year and this year too, we are paying it regularly, so MP is not a defaulter state.”

Similarly, Congress-led Rajasthan, which in its 2022-23 budget announced additional free electricity of up to 50 units for domestic users consuming up to 100 units per month, has spent 40,278 crore in the past three years and 6,545 crore in 2020-21 alone. Discoms in Rajasthan have an outstanding due of 4,201 crore to various gencos.

Cabinet minister Pratap Singh Khachariyawas said the 50 unit free electricity was for 36 lakh beneficiaries. “What the government is doing is for public welfare works and is acting as a trustee and not a trader,” he said.

“A person’s first right is roti, electricity and water. We are not like those who put tax on aata (flour) but work for the public. After Covid-19 pandemic, lakhs of people could not pay their bill, and the subsidy is for such families,” he said.

Goa and Kerala are the new entrants that started offering power subsidies in 2020-21, while Sikkim and Tripura started them in 2019-20, data showed. Further, of the 27 provinces offering subsidies, only five have seen marginal decrease in expenditure, while Gujarat, Telangana, Meghalaya and Jammu and Kashmir have kept their budget allocation on power subsidies the same during the three-year period.

Subsidy expenditure increased for all the other remaining states during the same period, data showed.

India has been battling a severe coal crisis, resulting in critical stocks at domestic thermal power plants. Since March, the power ministry has asked states to ensure basic payment discipline to Coal India, gencos and discoms to ensure continuous electricity generation.

The Aam Aadmi Party (AAP) has announced plans to replicate its Delhi model of free electricity to low consumption users in poll-bound Gujarat and Himachal Pradesh, both being ruled by the BJP. The AAP first launched the large-scale power subsidy scheme in Delhi after it came to power in 2015. The scheme benefits 86.6% of domestic consumers, according to official estimates. The scheme has now been implemented in Punjab after the Arvind Kejriwal-led party won the assembly elections in the neighbouring state earlier this year.

Several political parties, including the BJP and the Congress, have made similar poll promises in the lead-up to various state elections.

For a growing economy like India, electricity is a critical driver and the country needs to meet the rising electricity demand while decarbonising its energy mix, said Shalu Agrawal, senior programme lead at the Council on Energy, Environment and Water, a think tank.

“States clearing their pending dues of power utilities (be it tariff subsidies or unpaid bills of government departments) become important to resolve the poor financial health of power distribution companies,” Agarwal said. “These form almost 70% of the receivables expected by discoms. States and discoms must prioritise action on this front.”

“States could start by clearing pending subsidies and departmental dues through upfront deductions from budgetary allocations in a phased manner. However, fiscal constraints may pose challenges,” she added. “It is critical to rationalise and target subsidies to ensure that discoms break out of the vicious cycle of dues and reform packages.”

Officials in Karnataka could not be reached for a comment.

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    Sweta Goswami writes on urban development, transport, energy and social welfare in Delhi. She prefers to be called a storyteller and has given voice to several human interest stories. She is currently cutting her teeth on multimedia storytelling.

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