Punjab Government

Power subsidy defaults cripples Punjab State Power Corpoeration

June 05, 2019 04:19 PM

CHANDIGARH: Power subsidy bill of Punjab is increasing every year and so is the defaulting amount by state government forcing the Punjab State Power Corporation Limited (PSPCL) to go for short term loans to meet the day to day expenses. In Punjab timely payment of power subsidy to PSPCL is closely linked with the financial position and overall performance of the utility.

Punjab is among the few states in India which continue to provide free power to not just agricultural consumers but also to industrial and a sizable set of domestic consumers. The subsidy amount forms the  major part of PSPCL revenue. In the absence of timely payment the PSPCL has to resort to short term loans especially during paddy season when the power requirements go north.

For the last five years the Punjab government commits to Punjab state Electricity Regulatory Commission (PSERC) to  pay full subsidy amount due  to PSPCL  but not only it is delaying monthly schedule of payments but also not paying full amount within the financial year violating section 65  of Electricity Act 2003. The delaying payment affects the working of Punjab State Power Corporation Limited’s (PSPCL) which is already precarious finances.

Given the strained state government finances, it is understandable that the payments are not completely financed by budgetary allocations. The government also adjusts the subsidy amounts to electricity duty payable by PSPCL and makes adjustments based on government loans and interest payable by the PSPCL.

Regulatory commission   has worked out power subsidy of Rs.14972 crore for the financial year 2019-20. This amount includes shortfall of  Rs. 4885.55 Crore of subsidy paid by the state up to  31st March with interest of Rs. 593 crore for delayed payments making total last year’s balance subsidy amount of  Rs. 5297  crore .

The total subsidy worked out by commission for the current financial year only is Rs 9674 crore and this comprises 30% of total revenue requirement of PSPCL. If we take total power subsidy including arrears this becomes 46% of revenue requirement.

It is not only for free power to agriculture but also includes industrial and a section of domestic consumers.    62.6 %  of subsidy amounting to f Rs 6060 crore is  free for mostly unmetered power to agriculture sector,16.8 %of subsidy amounting  Rs. 1623 crore for SC / BPL / BC domestic consumers and 20.6 % of subsidy amounting Rs. 1990 crore is for industrial consumers.

Prayas Energy Group has worked out that the subsidy amount has been growing at 9% per annum and since financial year 2014-15 there have been significant delays in the payment of subsidies. PSERC on its part levies interest on the delayed payment of subsidy to compensate the PSPCL on this account. This year’s subsidy includes Rs.593.15 crore as interest.  Despite this practice, delays persist and the outstanding subsidies amount continues to grow.

Last year Padamjit Singh a retired PSEB chief engineer filed a petition before regulator on delayed payments of subsidy by Punjab government, regulator issued directions to PSPCL  to charge regular tariff in case timely payment of subsidy is not made. In a state which has been receiving free power for a major category such a step would result in tariff shock and could be politically infeasible. However PSPCL is putting subsidy data on its website every fortnight.

During the financial  year 2019-20 Punjab government has paid Rs.419 crore in cash and  the provisional amount of ED payable and IDF due amounting to Rs.500 crore for period up to May end has been adjusted by PSPCL  against due amount of Rs2286 crore leaving gap of Rs.1361 crore.

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