The promise of free or subsidised electricity in poll-bound states is giving enough fodder to political parties in the run up to assembly elections to be held in the next few months. Seven states are going to polls this year, of which five – Uttar Pradesh, Punjab, Goa, Manipur and Uttarakhand – will witness assembly elections in the first half of 2022 while Himachal Pradesh and Gujarat will hold elections towards the end of the year.
Earlier this week, Samajwadi Party president Akhilesh Yadav made his first major poll promise ahead of the 2022 Assembly election in Uttar Pradesh by promising to provide 300 units of electricity free of cost to households as well as free electricity for irrigation to farmers if voted to power. Just days later, the Uttar Pradesh government announced a 50 per cent cut on farmers' electricity bills for running their tubewells. The move would directly benefit over13 lakh users in rural and semi-rural areas.

Data from Crisil research shows agri-linked consumers account for 15 per cent of the total consumer base in Uttar Pradesh
"UP has 5 state discoms and amongst them Paschimanchal Vidyut Vitran Nigam (PaVVNL) and Dakshinanchal Vidyut Vitran Nigam (DVVNL) have the highest share of agri consumers at close to 20%. With free power, typically in the past, most discoms have increased rates for industrial consumers sharply to partially cover up for these losses and also end up reporting net losses. This deteriorates their financial situation resulting in sharp increase in debt," said Hetal Gandhe, director, Crisil Research. Thus begins the vicious cycle of higher state government support and delay in payments to creditors.
24% agri-linked power users in Punjab
Similarly, power freebies are being doled out in Punjab ahead of assembly elections which are slated to be held in March 2022. In Punjab, agri-linked consumers account for 24% of total consumers. Free power to farmers constitute 70% of total subsidies, free power to Scheduled Caste, backward caste and BPL families constitute 14 per cent of the total subsidies while subsidised power to industrial consumers constitutes 16% of total subsidies, as per data analysed by Prayas Energy Group.
Punjab also has a history of making high subsidy commitments and delaying payments to discoms. This impacts Punjab State Power Corporation Limited’s (PSPCL) already precarious finances. Not only has the Punjab government waived power bills of those having electricity connection of up to 2 kW, a move that will put a burden of Rs 1,200 crore on the state exchequer, but in May 2021 the government also announced a cut of 50 paise to Re 1 per unit for domestic power consumers in the state. Point to note: Since assuming power in 2017, the Congress government has defaulted on paying subsidy dues every year. It has coughed up a power bill of Rs 10,000 crore already, which has to be paid to PSPCL. And with chief minister Charanjit Singh Channi’s announcement of more sops, the subsidy bill for the current fiscal has touched Rs 20,016 crore, of which the government has so far only paid Rs 7,800 crore.
How does the freebie work? ...................................