Should power subsidies to farmers be scrapped? – Lalit Jalan

“With the average cost of supply at over Rs 5 a unit, every 10 per cent increase in agricultural supply will add Rs 7,500 crore to the deficit. Where will this money come from?”


Nothing is more expensive than no power”: As far as rural India is concerned, there can’t be a more apt adage than this.

Although there are thousands of villages that remain to be electrified, even the ones that have been electrified get power for four to five hours a day, that too mostly at night.

The stark reality is that owing to the short-sightedness of our policy makers and political class, we are unable to mobilise the courage and national consensus to do away with subsidised power to the farm sector. Decision makers fail to realise that more than subsidy it is round-the-clock availability and quality power that hold the potential to transform life in rural India.

Agriculture accounts for over 25 per cent of electricity consumption but contributes just five per cent to revenues. Inadequate tariff, on the one hand, and high technical and commercial losses on the other, have destroyed the financial health of all state utilities. Aggregate losses in 2012 are estimated at a staggering Rs 1.2 lakh crore (or 1.5 per cent of GDP).

Poor financial health has resulted in inadequate investments in the entire generation-transmission- distribution value chain, leading not only to serious shortages but also poor quality and reliability of supply. The recent back-to-back grid failures causing a blackout in the entire northern half of the country and affecting over 600 million people were as much due to lack of investment in capacity building and modernisation as due to excess drawals by states.

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