The Punjab government led by the Aam Aadmi Party has found itself trapped in a problem after it pledged 300 units of free power for every resident of the state. The data on the overall subsidy paid to various recipient sectors indicate that the subsidy bill, which amounted to Rs 604.57 crore in 1997-98 fiscal when free power was announced for the first time in the state, is projected to exceed the Rs 20,000-crore mark and reach nearly Rs 23,000 crore by the end of the current fiscal.
According to the reports, the financially unstable state has paid Rs 1.18 lakh crore to Punjab State Power Corporation Limited in terms of electricity subsidy conferred alone to farmers, Scheduled Caste (SC) communities, and the industry sector in 25 years until the end of the last fiscal, ever since former Chief Minister Rajinder Kaur Bhattal announced free power supply to the agriculture sector in 1997.
The situation under the current government led by CM Bhagwant Mann seems worsening as the state is expected to pay the power company a whopping Rs 22,962 crore in electricity subsidies to various categories, which would be a record payment made by the government to the power provider.
While the government intends to pay Rs 15,846 crore for power subsidies in the current fiscal year, an amount of Rs 7,117.86 crore is owed from the previous fiscal year. The government will spend Rs 6,947 crore on providing free power to agriculture and Rs 2,503 crore on providing free electricity to industries. As per the reports, the whopping amount of Rs 22,962 crore also comprises 300 free units of power for all Punjab citizens.
Rajinder Kaur Bhattal, who served as Chief Minister from November 21, 1996, until February 11, 1997, first instituted an electricity subsidy for Punjab farmers in January 1997. She had promised free electricity to farmers with up to seven acres of land. Farmers with greater land holdings were required to pay Rs 50 per horsepower.
Later, Parkash Singh Badal, who took over the state on February 12, 1997, promised a blanket electricity subsidy for all farmers. When Amarinder became CM in 2002, he collected fees on agricultural motors beginning in October 2002 at the rate of Rs 60 per horsepower, claiming depleted treasuries. However, due to a political choice, he was forced to reinstate free power in November 2005.
In 2005-06, the subsidy surpassed Rs 1,000 crore for the first time, reaching Rs 1,435 crore. That year, farm subsidies alone totaled Rs 1,385 crore. In 2007-08, the overall subsidy exceeded Rs 2,000 crore when the bill rose to Rs 2,848 crore, of which Rs 2,284 crore was the cost of free agricultural electricity. At the time, the state was ruled by a Shiromani Akali Dal-BJP coalition led by Parkash Singh Badal.
In 2009-10, the electrical bill increased to Rs 3,144 crore, with the agriculture sector alone accounting for Rs 2,804 crore. It was Rs 4,188 crore in the 2011-12 fiscal year (FY), while free farm power was Rs 3,879 crore. The next year, in 2012-13, the overall subsidy was Rs 5,059 crore, with agriculture garnering Rs 4,787 crore.
When Amarinder Singh returned to the helm of the state in 2017-18, the subsidy cost nearly doubled to Rs 11,542 crore. This contained a Rs 2,500 crore legacy fund left by the previous administration. It crossed the Rs 15,000 crore barrier in 2019-20. And during current fiscal year, it will surpass Rs 20,000.
Reports mention that in 2017, the then CM Captain Amarinder Singh directed that the bureaucrats investigate if he could provide direct benefit transfer of electricity subsidy to farmers. A few transformers had metres installed. However, the programme could not be expanded to include the entire state.
The ruling AAP administration, led by Bhagwant Mann, has now gone a step further, providing free 300 units to home users. According to Punjab State Power Corporation Limited, power consumption has remained constant at 14,000 MW even during non-peak demand. It is projected that the electricity subsidy would soar, further draining the state state coffers.
Reportedly, the growing electricity subsidy has cost the taxpayers over Rs 2 crore every hour in payments to Punjab State Power Corporation Limited (PSPCL).
According to the PSPCL, the financial strain is expected to grow much more in the following summer months. At the moment, a house uses 150 to 180 units on average, and even at Rs 7 a unit, this is burning a hole in the government’s budget. “Roughly, every household is now getting power subsidy worth Rs 1,100 to Rs 1,200 per month and it will reach around Rs 1,350 per month in the next summer season,” officials at PSPCL were quoted saying.
According to an official, all customers are eligible for 600 free units every two months. If their use surpasses 600 units, they must pay the entire amount. Data released recently shows that 2.94 lakh new residential connections were released in the time this year, compared to 2.20 lakh in the same period last year, with many users apparently opting for more than one connection to claim maximum benefit at the cost of state.
Interestingly, when the prior administration last year announced a Rs 3 per unit refund up to 7 kw load, many customers had lowered their consumption to obtain relief. The government at present has raised a loan of Rs 2,300 crore this year and as many as 87% of the 74 lakh domestic consumers in the state of Punjab have got ‘zero bills’ in November. Also, the PSPCL is currently losing more than Rs 1,880 crore, compared to a profit of Rs 1,069 crore it earned in March 2022 as a result of the a poll promise that Punjab CM Bhagwant Mann executed in July this year.