Stating that the “politicisation of electricity is going to be disastrous,” Union power minister RK Singh said on Thursday that if the states plan to “distribute electricity for free, and if you don’t have the capacity to pay for it (to the power distribution companies), then ultimately the country will go dark”. The statement from Singh comes soon after a number of political parties recently made promises of reducing electricity tariffs, or making power completely free, for certain consumer categories in Uttar Pradesh during the run-up to the assembly elections in the state.
Power tariffs for domestic consumers were reduced by Rs 3/unit in November 2021 in Punjab, which is also nearing assembly elections.
The UP government has also recently increased power subsidies for around 13 lakh agricultural consumers in the state, which is seen to add a burden of around Rs 1,000 crore on the state-run Uttar Pradesh Power Corporation.
“Many states do not even have an account of the subsidies which they should be paying, and Uttar Pradesh is one (such state),” Singh added while addressing a CII conference on smart metering.
At the end of June 2021, states had not cleared accumulated subsidies worth Rs 71,865 crore — meant for certain consumer categories (including households and farmers) but routed via the power distribution companies (discoms).
According to experts, industrial and commercial electricity consumers across the country pay around Rs 80,000-crore cross-subsidy, as they pay higher power tariffs to partly compensate the under-recoveries discoms suffer on account of providing power at cheaper rates to domestic and agricultural consumers. Of course, a larger part of the subsidies is borne by state governments and these were to the tune of Rs 1.1 lakh crore in FY20. To improve the finances of the discoms, the power ministry has said that funding under the Rs 3-lakh-crore discom revival scheme, approved by the Cabinet in June 2021, is contingent on the state governments concerned agreeing to pay subsidies on time. The scheme also requires the discoms to conduct regular energy accounting to ascertain the exact amount of subsidy to be received from state governments.
Out of the estimated central budgetary support of Rs 97,631 crore for the new discom revival scheme, around Rs 23,000 crore has been earmarked for the installation of 25 crore smart prepaid meters across the country by 2025. The total outlay for smart-metering under the scheme is Rs 1.5 lakh crore, of which the Centre will provide Rs 900 per meter to the discoms. States which are able to install smart prepaid meters before December 2023 will also be eligible for an additional incentive of Rs 450 per meter. As in July 2021-end, about 25.2 lakh smart meters had been installed across the nation, and around 81 lakh smart meters were at different stages of implementation.
Prepaid electricity meters are seen to be a major tool to aid the efforts of discoms to cut pilferage, and reduced their gap between the cost of power supply and revenue realised by ensuring timely payments from consumers. Speaking at the same event, Alok Kumar, secretary, ministry of power, said that the shortage of chips in the international market has impacted the programme and against the order awarded to install one crore smart meters, the target of only 36 lakh meters has been achieved. Kumar said that the component supply shortage would be addressed in the next 3-4 months.