Guest Column

This year8217;s Economic Survey pointed out that the hidden power subsidy for agriculture and domestic sectors had increased from Rs 7,248 crore in 1991-92 to Rs 24,257 crore in 1997-98. It also cautioned that the hidden subsidy to these two sectors would shoot up to Rs 31,599 crore in the next fiscal and the SEBs would incur a commercial loss of over Rs 13,800 crore in 1998-99. While the total subsidies in the power sector has registered an increase of 13.42 per cent, state subvention has decreased by 29.7per cent.

The rate of return for the SEBs, which should not be less than 3 per cent has reduced to a negative of 21 per cent as against a negative 19 per cent in the previous year.

While SEBs do not have enough resources to finance future programmes, they are also unable to raise funds from alternative sources due to their poor financial and commercial performance. One of the main hurdles to private sector participation gaining momentum is the reservation about the capacity of SEBs to pay for power in view of their generally poor financial performance. Keeping the deteriorating financial position of SEBs in view, the Common Minimum National Action Plan CMNAP was formulated in 1996.

The CMNAP now forms the National Agenda for Power Sector. It envisages that a minimum agricultural tariff be charged in the entire country and the same should be increased over a period of three years to cover 50 per cent of cost of supply to agriculture. Though the much needed legislation was introduced in theParliament, due to political pressures, this provision was deleted at the time of enactment. The tariff for all the consumers would now be fixed by the state electricity regulatory commissions, wherever established and if any state decides to give any subsidy to this sector, it is required to be provided in the state budget. While this proposal does appear feasible on paper, in practice, it would be impossible for the state governments to make adequate provisions in the budget, year after year, as most of the state governments are financially very weak. For example, the Punjab Government, due to financial crisis, was required to hypothecate some government properties to pay the salaries of its employees. The position of other states may not be very different.

The rationalisation of tariffs in respect of power, transport and irrigation would result in substantial increase in state resource. However, most of the states are reluctant to carry out any such rationalisation for fear of annoying voters. It wouldbe impossible for any state to really provide subsidies to the extent of Rs 20,000 to Rs 25,800 crore every year to the electricity sector. There is need for the present government to strive to arrive at a political consensus at the national level so that agricultural tariffs are uniformly fixed and implemented.

The power sector presents today the picture of gloom with the gap between demand and supply increasing menacingly. Unless we statutorily and institutionally ensure viable SEBs or their successor institutions, the reforms and restructuring being brought up in the country would remain incomplete and the power sector would continue to impede the progress in economic development of the country.

The author is former secretary, Ministry of Power