AP does well to plan switching over to DBT for power starting FY22; other states should take a cue from it
In 2004, when the then chief minister of Andhra Pradesh (AP) started a free farm electricity scheme, the total outgo was expected to be Rs 400 crore. Today, over 17.55 lakh farmers avail of the scheme and the subsidy bill on the state has grown over 20 times, to Rs 8,500 crore. Discoms in the state, meanwhile, have been burdened with massive debts.
In FY19, AP discoms reported a loss of Rs 16,736 crore. So, it is not surprising that AP, in FY22, will become the first state to initiate power reforms, moving to a direct benefit transfer system. While the Centre had suggested that states move to the DBT system in its draft electricity Act, to reduce power subsidy outgo, not many states have shown willingness to tread this politically fraught path. However, with AP moving towards DBT for power—the state will start with one district in December this year—others may also take a cue.
A study done by J-PAL in Punjab had indicated that, if farmers are givenRs 48,000 in their bank accounts, instead of free electricity, they will end up using less power and the state’s savings will increase. While Punjab also has shown interest in DBT for power, this isn’t the first time that there have been deliberations on such a step.
Earlier, in 2018, the Punjab State Farmers’ and Farm Workers’ Commission had proposed a plan to start charging better-off farmers for electricity.
Agri-economist Ashok Gulati and many others have been advocating to stop the culture of doles. If more states adopt it, then DBT for power can help reduce India’s subsidy bill of more than Rs 5 lakh crore.