These discoms have accumulated losses of almost Rs 95,000 crore with an estimated daily revenue gap of Rs 80 crore adding to the mess
In the run up to the high-stakes 2022 Uttar Pradesh assembly elections, the political parties had announced with much fanfare their respective manifestos adorned with populist announcements to woo the electorate.
Nevertheless, the energy sector freebies grabbed the maximum media space as also the popular imagination given the fact that the UP power tariffs are among the highest in the country. All the major parties, viz., BJP, Samajwadi Party, Congress and Aam Aadmi Party have made competing power sector pre-poll promises.
Yet these outfits have applied little thought to the precarious financial condition of the state power utility, UP Power Corporation Limited (UPPCL), and the distribution companies (discoms).
Understandably, there are financial and technical imperatives involved in the energy sector pre-poll freebies held out by the parties owing to their populist agenda to get an upper hand at the hustings.
The UP discoms have accumulated losses of almost Rs 95,000 crore with an estimated daily revenue gap of Rs 80 crore adding to the mess.
Much of the low incomepopulation consumes less than 100 units a month. Considering that the peak demand in UP hovers around 25,000MW on a daily basis, the free power promise will invariably lead to higher consumption to avail of the dole.
However, the political economy of the energy sector, which touches the lives of about 30 million electrified households in UP, is too much to ignore, especially during election times.
Sample this: The Akhilesh Yadav-led SP has promised to provide 300 units of free electricity to every household plus ensuring a 24-hour power supply in the state. Yadav claimed the free power plank would incur “just” Rs 12,000 crore annually.
Energy sector experts warn that the promise of free power for the first 300 units in a big state like UP with about 30 million consumers would spur sudden upsurge in demand. This would not only stress the transmission and distribution infra but catalyse the gaping revenue deficit sinkhole.
In its farm outreach especially in the backdrop of the recent farmers’ stir, the ruling BJP helmed by Yogi Adityanath has also promised free power for irrigation.
AAPhas announced plans to replicate its Delhi model in UP by giving 300 units free to the domestic consumers if voted to power.The party has promised to waive off outstanding power bills and give free power to farmers if it formed the UP government.Not to be outdone, Congress has joined the freebie league too, promising to slash power bills by half and waive outstanding bills pertaining to the Covid period.
According to UP power consumer activist Avadhesh Verma, the free power promise by the different parties together with the financial outgo already incurred owing to the subsidised or free power to certain sections of consumers, including farmers, would cost the exchequer more than Rs 30,000 crore annually.
In the 2020-21 annual revenue requirement (ARR) statement filed by the UP Power Corporation Limited (UPPCL), the revenue shortfall was pegged at Rs 16,000 crore. “Against the total expenditure estimated at Rs 78,215 crore, the revenue together with the subsidy amount was projected in the ARR at a little over Rs 62,000 crore. Thus leaving a deficit of Rs 16,000 crore,” he informed.
He blamed a gamut of factors for the precarious condition of the UP discoms, including political interference with the power sector issues, populism, freebies, costly power purchase agreements (PPAs) signed during previous regimes, corruption etc.
On one hand, the populist measures are bleeding the discoms each day, the political interference, corruption and political compulsions, especially during election times prevent the overhauling of the energy sector as also strict compliance with regards to defaulters.
“Energy is the raw material of development. Unless there is energy security, the economic development agenda would remain an unfulfilled dream. There is an urgent need to stem political interference with the energy landscape, and to review the decision of unbundling of the UP State Electricity Board,” All India Power Engineer Federation (AIPEF) chairman Shailendra Dubey noted.
He lamented that the government departments and agencies were among the top defaulters of the state energy sector, which was a major reason for the dwindling fortunes of the public sector power utilities.
“For example, the civic bodies are major defaulters, but the power department cannot summarily shut down power supply to the street lights managed by the municipalities owing to law and order as well as public convenience factors. This leads to a perennial built up of arrears for the discoms,” he added.
(The writer is a Lucknow-based financial and political journalist. The views expressed are personal.)