Nitin Raut: Doing away with cross-subsidy in power sector will adversely affect farmers, poor

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By: Express News Service | Mumbai | Published: June 13, 2020 3:49:52 am

nitin raut, cross subsidy, cross subsidy in power sector, centre eliminates cross subsidy in power sector, Raj Kumar Singh, union energy minister, electricity amendment bill, indian express news Maharashtra Energy Minister Nitin Raut. (File)

State Energy Minister Nitin Raut said Friday the Centre’s decision to do away with cross-subsidy in the power sector will adversely affect farmers and the poor.

In a letter to the Union Energy Minister, Raut pointed out that the proposed Electricity (Amendment) Bill, 2020, has entirely eliminated cross-subsidy — a policy introduced to provide electricity to poorer citizens and farmers at cheaper rates as compared to commercial and industrial consumers.

Earlier this month, Raut had urged the Centre to withdraw its proposed Electricity (Amendment) Bill, 2020, saying it “clearly violates” the constitutional mandate and “undermines” its federal structure.

“The cross-subsidy mechanism envisaged support to consumer categories with low capacity to pay viz, below poverty line (BPL), low-end residential consumers, and agricultural consumers. The withdrawal of the subsidy would impact adversely on society as a whole,” Raut stated in the letter.

He pointed out every state had different consumer mix and specific needs of cross-subsidy for a particular category of consumers. For example, he said, Maharashtra uses the highest number of agriculture pumps in the country and its electricity consumption is significant, unlike other states.

“In case of a stringent target of cross-subsidy reduction provided in tariff policy, which becomes mandatory as per proposal in the amendment Bill, it would lead to a tariff shock to the said category. Therefore, the State Electricity Regulatory Commissions need to be allowed to continue and decide the progressive reduction in the cross-subsidy without mandating it and considering tariff policy as a guiding document,” the letter said.

He further said the proposed amendment Bill also provided for Direct Benefit Transfer (DBT) of subsidy to consumers in advance and allowed consumers to be charged without subsidy as per the commission determined tariff. He cautioned the Centre against rushing the amendment without factoring multiple issues faced by states “as ground realities were very different”.

The identification of a beneficiary for DBT, he said, could pose a serious challenge as the power meters were in the name of owners/old owners or one of the family members, while a premise could be occupied by tenants or another member of family/ person. According to Raut, in such a case, the DBT may get passed to premises and not on actual user of electricity, which is also not expected in DBT.

Considering very low recovery from agriculture consumers and with the advance payment of DBT, he argued, “There will be a further increase in arrears, an additional burden of penalties on consumers, and an increase in financial woes of the distribution companies. The end result of such non-payment may be disconnection of power for a consumer, which is not expected in the DBT.”

Drawing attention to more complex issues, he said, at present, any delay in receipt of subsidy is being borne by the licensee, but under the proposed advance DBT if there is any delay in transfer of subsidy to a consumer then it will directly affect the consumer, who may opt for not paying the future bills.

“Therefore, the reference of advance payment needs to be removed and more clarity is required in terms of method of payment of subsidy to consumers in the proposed amendment Bill,” Raut said.

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