In Punjab, after the clandestine victory of the AAP govt in March 2022, the Bhagwant Mann government launched a 300 free units per month scheme for all categories of domestic consumers. The most favorite scheme of AAP govt’s free 300 units scheme was commenced on July 1, 2022

Unbridled free power to agriculture and the majority of domestic consumers bleeds Punjab’s coffers as the subsidy bill of PSPCL has increased to Rs.21909 crores in 2024-25 from Rs. 604 crores In 1997-98 when electricity was made free for all farmers for the first time. In 27 years the subsidy bill has increased more than 36 times. Punjab subsidy bill is around  10% of the total Punjab government budget.

Rationalization, not reduction, of subsidies for free power to farmers and the domestic sector is the immediate solution of the hour, but the mute question is who will bell the cat? Politicians of every party see free power as their vote bank and under such circumstances whether the political thinking will ever veer around to shed the misconception of sops-based vote bank syndrome.

Punjab provides free electricity to the agricultural sector,  300 units of free electricity for every household in the state, a subsidy to consumers up to 7 KW load, and SC, BC, and BPL households charge from the lowest tariff slab after consuming 300 monthly units.

In the current fiscal year 2024-25, the total power subsidy bill is set to touch Rs.21909 crores, including  RS.10175  crores to agriculture consumers, Rs 8785  crores to domestic categories (including 300 units free), and Rs.2949  crores for industrial consumers.

There are about 14.5 lakh agriculture tube wells that get free power in the State. Out of these 10,000 farmers have four to nine tubewells, whereas more than 29,000 farmers have three, and 1.42L farmers have 2 connections.  Consumers with two or more connections get around 28% of the total agriculture subsidy. There are more than  10000 consumers with four or more four tubewell connections and get around 10% of the total subsidy amounting to Rs. 200 crores. There are 1.42 lakh farmers with two motors and get a 1500 crore subsidy. More than 29000 farmers have three Tubewell connections. Therefore it’s time to consider the rationing of free power.

The area under rice has increased many times, which means that major irrigation requirements have increased, while the water table has gone down, which means more power is needed to draw out the same quantity of water and the cost of electricity supply has also increased. The free electricity to the farm sector is often quoted as the main precursor to the increase in the rice area, over-exploitation of groundwater, and as an obstacle to diversification.

Free power distorts demand, and discourages efficient use and resource management, creating barriers to critical reforms like eliminating cross-subsidy of domestic and agricultural users by commercial and industrial users.

Free power to Punjab farmers has since become a volatile issue linked to the politics of competitive populism. Free power to farmers and most of the domestic consumers is considered a drain on the Punjab government exchequer and groundwater.

In 2020, a report submitted by a group of experts led by Montek Singh Ahluwalia, to the Punjab government explained that 56 percent of the total power subsidy that the State has to bear annually goes to medium and big farmers who own more than 10 acres.

The withdrawal of free power to farmers and domestic consumers who pay income tax should be the first and not the last step to rationalize the power subsidies. The farmers using more than two tubewell connections should be charged for extra connections. It is the need of the hour to give subsidies to only economically vulnerable farmers.

The farmers using more than two tube well connections should be charged for extra connections.  In Punjab, options should be given to consumers, who voluntarily want to come out of the free power regime.

The silver lining in the above scenario is that the chief minister is an outrightly honest person and so is the CMD of PSPCL.

NOTE: The writer is a spokesperson of the All India Power Engineers Federation (AIPEF) and the views expressed are personal.