BJP govt in a fix over power subsidy in debt-ridden state

While it has started rolling out a red carpet for investors, the BJP government may not be able to offer the industry a competitive power tariff, because of the financial crisis the state is mired in. The paucity of funds in the state coffers may prevent the Devendra Fadnavis government from subsidising the power tariff with an annual grant of Rs8,000-10,500 crore.

While it has started rolling out a red carpet for investors, the BJP government may not be able to offer the industry a competitive power tariff, because of the financial crisis the state is mired in. The paucity of funds in the state coffers may prevent the Devendra Fadnavis government from subsidising the power tariff with an annual grant of Rs8,000-10,500 crore.

The previous Congress-led government had announced a 20% rebate in tariff for industry, after leaders in the sector protested the high rates in the state and moved out to states like Gujarat, where power is cheaper than in Maharashtra. A similar rebate was offered to domestic consumers using up to 300 units per month, and to agricultural pumps. A monthly subsidy of Rs706 crore was earmarked in the budget for the scheme till March 2014.

The subsidy, if withdrawn, is expected to discourage industries and manufacturers from setting up plants in the state. The government has not yet taken any final decision in this regard.

The BJP government is staring at a revenue deficit of Rs20,000 crore for next fiscal cycle. Officials in the finance department have suggested that power subsidy be done away with from next year. Officials have suggested a 40% budget cut in all development works next year, if the crisis is unresolved, said sources.

The CM is reported to have asked if it is feasible to work out an alternative plan of action. “The CM said rates could be reduced even without giving any subsidy. He asked the state companies to run generation plants at full capacity and increase distribution efficiency,” said a senior official, requesting anonymity.

A section in the energy department said measures suggested by Fadnavis would be successful only when thermal power stations got adequate coal and gas supply. “None of our (thermal) stations are running at full capacity because of fuel issues. The state’s hydro power potential is limited, whereas states like Gujarat have more hydro power, which is cheapest,” said a senior official.

Also, the state’s power purchase agreements came into force only after 2008, at least three years after they did in Gujarat. “We relied on the Dabhol project to give us adequate power supply, but when it ran into trouble, we started signing agreements with electricity providers at rates higher than Gujarat,” said the official.