Sources in the chief minister's office (CMO) told FE on Tuesday that "a decision to clear the entire outstanding amount of Rs 1,361.66 crore was taken by the chief minister Parkash Singh Badal at a meeting held at his official residence late on Monday evening".
The decision follows a directive from the power ministry, suggesting the Punjab State Electricity Board (PSEB) should not commit illegality by not charging the subsidy in advance as per the provision made under Section 65 of the Electricity Act 2003. Prior to that the Punjab government had taken an adamant view on the decision taken by the PSERC and state's advocate general HS Mattewal that the state would file an appeal before the appellate authority against the decision of the regulatory commission, directing the state to clear outstanding amount by March 1 or face recovery of bills from sector and others who were drawing free power.
It is learnt, chief secretary RI Singh too has sent a memo to chairman of PSERC, stating that the finance department is making necessary arrangements to clear the amount by March 1, 2008.
Sources in the CMO told FE, "The Punjab government is embarrassed and it has taken a decision to ask PSEB to adjust the loan of Rs 3,000 crore."
As per Electricity Act, 2003, the state government is supposed to pay the subsidy in advance to provide free power to any sector or section of the society. In the absence or default or failure to pay the subsidy, the commission can order the PSEB to charge the bill from those sections of the society which were to get free power. But PSEB sources say that the fund starved state government has not been able to pay subsidy to the board from January 2007 onwards. With annual subsidy of about Rs 2,150 crore, the arrears account for about Rs 1,350 crore.
For Punjab the issue could not have cropped at a worst time as unbundling of PSEB too was due and the state government had sought extension from Centre till February 29, 2008.