Normally, one would have expected a vanguard agrarian state like Punjab to be at the forefront of power sector reform. But this expectation has been belied all these years. The previous Akali Dal government extended the facility of free electricity to its farmers after assuming power in February 1997. The current Congress government led by Amarinder Singh had no qualms whatsoever in promising to continue this regime, but has now been forced to bite the reforms bullet because of the compulsions of bankruptcy. The chief minister in fact sat on the recommendations of the Punjab State Electricity Regulatory Commission for a tariff hike for over a month before reluctantly accepting it. Though the proposed levy of 57 paise per unit or Rs 60 per BHP per month does not totally cover up the losses of the states electricity board, this move is a milestone on the path of reform. If this is followed up by measures to improve efficiency and cut transmission and distribution losses, the power sector will cease being a drag on the state exchequer. In turn, this experience can serve as a beacon to the geographically contiguous agrarian states of Haryana and Uttar Pradesh.

Punjabs first steps towards a modicum of cost recovery will garner Rs 300 crore. Energy sales to the agricultural sector is around 5,200 million units which in a regime of giving this free to its farmers cost a whopping sum of Rs 1,600 crore. The latest tariffs stanch this haemorrhage although much will indeed depend on how the states chief minister deals with its political backlash. For a sense of perspective, the power tariff was pegged at Rs 65 per BHP in 1994, which was later reduced to Rs 50 per BHP in 1996 before being waived off completely by the Prakash Singh Badal government since 1997. There have thus been sharp swings in the efforts to make Punjabs politically powerful farmers pay even a modest tariff. The states example flew in the face of conventional wisdom that farmers were ready to pay for quality and uninterrupted power. But not any more, as the state cannot even pay for coal for electricity generation. Not surprisingly, the Indian Railways have threatened to stop coal supplies to power generation plants. With a bankrupt fisc, there are limits to populism in the power sector. There is no way that Punjabs chief minister can go back to the status quo ante on free power to its farmers.