A study conducted by Assocham ?Free electricity @ what cost ?? has made a strong case against the populistic measure.
According to the study, state electricity boards of Punjab and Tamil Nadu were incurring huge losses and facing the problem of supply deficits with -10.1% and -4.9% respectively for the period April-July 2008-09.
The study released to FE here on Monday says that the two state electricity boards were incurring at least Rs 3,000 crore annually for supply of free power to farmers, assuming that the electricity is being transmitted at prevailing domestic rates on a system of 2HP, which otherwise could have been gainfully utilised in augmenting generation of electricity, strengthening the transmission and distribution system, according to the study undertaken by the AssochamEco Pulse (AEP).
It may be recalled that Punjab in 2001-02 and Tamil Nadu in 2004 announced free electricity to farmers. The study says that the state owned power boards since then are incurring huge losses, while passing the burden to other category of consumers. Even the industries are regularly complaining that they are increasingly becoming uncompetitive vis-?-vis their counterparts in other states. In fact large number of industrial units from Punjab have moved out to neighbouring Himachal Pradesh in the very recent past.
The study points out that in the true sense, neither the interest of the farmers nor of the states is served, with free power supplied as the power made available is inadequate, unreliable and poor quality thereby making states unpopular and unattractive for investment said Sajjan Jindal, president, Assocham.
Jindal said that loss incurred on providing free power supply to the agriculture sector was about Rs 1,975 crores per annum while it was Rs 1,140 crores in case of Tamil Nadu. The total loss comes to about Rs 3,115 crores at the prevailing domestic price of Rs 3.68 per unit in Punjab and in Tamil Nadu at Rs 4.75 per unit as at present.
Punjab supplies power to the agriculture sector about 8 hour every day. The state with the policy of free power supply to the farm sector and 12.32 lakh energized irrigation pumpset and tubewells are set to incur losses amounting Rs. 1,975 crore per annum at the prevailing domestic rate of 3.68 per unit for a power supply of 2HP to the sector. Likewise, Tamil Nadu provides 14-hour a day electricity supply to its agriculture sector. The state have almost 3.14 lakh energized irrigation pumpset/tubewell, its policy of free cost of power to the sector is leading to incur huge losses amounting Rs. 1,140 crore per annum at the prevailing domestic rate of 4.75 per unit with a power supply of 2 HP to the farm sector.
The Assocham said who should pay for the losses when almost all the states electricity boards are in plight of filling the demand-supply gap of electricity? State governments that are offering electricity to the farm sector at free cost are hampering the farm production along with timely, cost-effective supply of power jeopardizing industrial progress.
The India agriculture sector according to Jindal alone accounts for about 27 % of the total electricity consumption, and with states offering free supply of electricity to the farmers are absorbing a portion of the cost from other category of consumers. The industrial sector which, is already paying heavy rates for power supply is unable to fetch 24 hours flow of electricity.
The widening gap between demand and supply of power leads in fluctuating voltage, scheduling of the supply is also creating hurdles in setting up of industrial unit in rural areas. Supplying low-voltage power burns out farmers?pump sets and state electricity board transformers that take months to get replaced.
The burden of losses is shifted to the domestic and industrial sectors who are already paying heavy bills for electricity supply suggests the Assocham study.