The Hindu : Andhra Pradesh News : The nitty-gritty of free power supply

Online edition of India's National Newspaper
Sunday, May 16, 2004

Andhra Pradesh

Andhra Pradesh

The nitty-gritty of free power supply

By M. Malleswara Rao

HYDERABAD, MAY 15. The free power supply and waiver of arrears announced yesterday by the new Government will place the Andhra Praedsh farmer in an enviable position among his counterparts in the country.

In addition to the financial benefit of Rs. 1,627 crores on account of these, the farmers are to get a major chunk of Rs. 821 crores this year out of Rs. 1,750 crores of cross-subsidy contributed by industries. A further amount of Rs. 610 crores is due to them from Rs. 1,303 crores of regular "direct subsidy" by the Government. All these put together will ensure a total benefit of Rs. 3,058 crores to the farm sector this year.

Nowhere in the country such a large amount is spent on farmers nor is free supply given. Punjab introduced free supply only to withdraw after a year unable to bear the financial strain. Tamil Nadu implemented the measure at a minimum level but it too ended it recently.

The AP Transco is confident about continuing the boon in the coming years as the waiver is a one-time benefit and the burden on this count (Rs 1,191 crores) will not recur. The annual burden will be only Rs. 436 crores. Things can go smoothly if the Government releases this amount as also the direct subsidy.

The benefits, however, clash with the AP Electricity Reforms Act through which the reforms were introduced in the power sector, and the recently enacted Electricity Act 2003 at the Centre. Under the State Act, the State Government can issue "policy directions" to the Regulatory Commission to benefit a particular section only if backed by subsidies, while the Central legislation wants to end subsidies.

As a follow-up of the Chief Minister's announcement, the Transco prepared submissions to be presented to the Regulatory Commission seeking clearance. The APERC's green signal is considered to be a foregone conclusion as the Government will absorb the additional burden on the power utility.

The "cost to serve" of power utilities in the State has been estimated at Rs. 2 per unit but it comes to Rs. 1.61 for agriculture as this sector is given supply during off-peak hours. The scenario for the year may change drastically if monsoon fails leading to bad hydel-thermal mix as seen this year. The Transco projections for this year approved by the Commission were based on the assumption of "good monsoon." If nature does otherwise, the 23 lakh agriculture pumpets may need more than 10,000 million units (mu) out of the projected total requirement of 48,000 mu for this year.

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