Punjab: Power Play

WHEN DELHI CHIEF MINISTER Arvind Kejriwal promised 300 units of free electricity for household consumers in a Punjab headed for Assembly polls next year, he set the cat among the pigeons. In no time, Navjot Singh Sidhu—the bitter rival of Punjab Chief Minister Amarinder Singh—seized upon the issue for his own political ends. While the state reeled under severe power cuts at the end of June, the populist statements by two contenders for power sent the political temperature in the state beyond its boiling point.

Kejriwal told reporters in Chandigarh on June 29th that the promise will be fulfilled on the first day after the Aam Aadmi Party (AAP) is voted to power in the state. He also promised that disconnected electricity connections would be restored and all domestic power bills in arrears would be waived off. Free power to farmers would continue.

Within days of Kejriwal’s statement, Sidhu tweeted: “Truth of Power Costs, Cuts, Power Purchase Agreements & How to give Free &24 hour power to the People of Punjab: 1. There is No need for Power-Cuts in Punjab or for the Chief Minister to regulate office timings or AC use of the Common People…If we act in the right direction.” In the tweetstorm, Sidhu made a case for new legislation to change the structure of the “expensive” Power Purchase Agreements (PPAs) signed during the time of Parkash Singh Badal as chief minister.

Punjab’s political environment had been heating up for a long time with Sidhu’s dissidence in the state council of ministers. But suddenly, the combination of Kejriwal and Sidhu—including his meetings with top Congress leaders like Rahul and Priyanka Gandhi—accelerated the process. In contrast, Amarinder Singh had to face a three-member All India Congress Committee (AICC) panel headed by the leader of the opposition in Rajya Sabha, Mallikarjun Kharge. He returned to Chandigarh without meeting the Congress leadership.

Singh finally met Congress’ interim president Sonia Gandhi on July 6th but remained tight-lipped about what transpired at the meeting. All he said was that Congress’ Punjab unit was ready for the elections and it would obey any orders given by the Congress president.

Punjab has been on AAP’s radar for a long time. The party contested Assembly elections in 2017 and even after posting a surprising number of wins in the Malwa region of the state, it was nowhere near the number necessary to get the office on the second floor of the Punjab Civil Secretariat.

This time, Arvind Kejriwal has found a model that has traction. Across Punjab, there is talk of the ‘Delhi formula’ to give free power benefits to a bigger number of consumers

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This time round, AAP and Kejriwal have found a formula that has traction unlike in the past. Across Punjab, there is talk of the “Delhi formula” to give free power benefits to a bigger number of consumers in the state. For his part, Kejriwal seems to be re-running the script from his first term in Delhi when he went hammer and tongs after power distribution companies in the national capital for “over-charging” consumers. The rationality of free power in a financially cornered state may be one thing but Punjab has a very strong populist tradition that makes it very difficult to set its power sector right again.

In the late 1990s, former Prime Minister IK Gujral, during one of his trips to Punjab, his home state, had warned then Chief Minister Parkash Singh Badal that his free power commitment to farmers could become an albatross around the neck of the state government and lead to massive depletion of underground water reserves. At that time the subsidy for free power amounted to less than Rs 1,500 crore, a paltry amount compared to what the state government is forced to cough up these days. The Shiromani Akali Dal (SAD), which projected itself as a pro-farmers party, had promised them free power in the run-up to the 1997 Assembly election, which the party had swept. Within months, the chief minister felt the heat of the rising debt burden, but considerations of the political repercussions kept him from rolling back his poll promise.

When Congress’ Amarinder Singh came to power in 2002, he withdrew the sop while ensuring eight hours of continuous power for farmers. In 2005, however, after Congress’ drubbing in Punjab during the Lok Sabha elections of 2004, and about 15 months ahead of the next Assembly election, pressure mounted on the party leadership in the state, particularly from border areas, to restore free power to farmers. Singh gave in and justified his move by saying the state had the resources for it as there had been an over 100 per cent increase in revenue receipts. Congress saw the 2004 defeat in the state as backlash for the withdrawal of the free power sop.

SAD has dismissed Sidhu’s accusations against it, blaming the crisis on mismanagement by Congress and called Kejriwal’s promise hogwash. “To blame us for the situation today is ridiculous. We were power surplus when we left,” says Rajya Sabha MP Naresh Gujral. The SAD government, realising that it required Rs 26,000 crore for power generation, had roped in the private sector, a move made through the Central Bidding Document, which was prepared by the Centre, then under the Manmohan Singh Government.

According to him, if Kejriwal’s promise were implemented, it would raise the free electricity cost to the state exchequer from Rs 11,000 crore to Rs 16,000 crore. “The state government is facing a crunch. It has no money for coal. It has not built capacity and demand, which increases by 500 MW every year, has gone up. Kejriwal talking of giving 300 units free is ridiculous in a bankrupt state. He should explain where revenues will come from. Besides, free power is a bluff because even if the consumption goes beyond 300 units to 301 units, the consumer will have to pay the entire bill,” says Gujral. Considering that electricity rates in Delhi for commercial and industrial power is almost 30-40 per cent higher and around 25 per cent higher for domestic use than in Punjab, he asks if Kejriwal intends to raise these rates in Punjab to fund 300 units.

Congress too is of the view that Kejriwal’s promise is an election stunt, which is not feasible in the state. “It’s a jumla. Punjab is not Delhi. AAP does not understand the state. The party is collapsing in the state with several of its MLAs joining Congress,” says Manish Tewari, Congress MP from Anandpur Sahib.

POLITICS OVER THE power issue is, however, linked to the wider currents of politics in the state. There is disenchantment with Amarinder Singh. Much of that has to do with his inability to take “strict” action in the case of sacrilege against the Sikh holy book Guru Granth Sahib. The controversy dates from 2015 when torn pages of the Guru Granth Sahib were found at different places in the state. There were incidents of violence prompted by protests against the desecration of the holy book. The state government appointed a judicial commission of inquiry that submitted its report in 2018. In April this year, the Punjab and Haryana High Court quashed the investigation into those cases and ordered the formation of a new Special Investigation Team (SIT) for the matter. Incidentally, the original SIT was led by Kunwar Vijay Pratap Singh, an IPS officer who quit the service and has now joined AAP. Many local observers Open spoke to in Punjab said there is an undercurrent that Sidhu is a “decisive leader” who would have taken a different course of action on the sacrilege issue.

Whatever be the truth of those claims and counter-claims, the reality of the power sector in the state is grim. On June 5th, the Punjab State Power Corporation Limited (PSPCL), the state’s power utility, issued a circular saying that in view of the prolonged dry spell and increase in demand of power from the agriculture sector, access to electricity would be further tightened for industrial consumers. Most would not get power for the next three days (from June 7th till June 10th). In case they consumed electricity, they would be penalised. In any case, industrial consumers are facing two-day power cuts every week now. Since then, the power crisis has deepened further even as industry associations reacted against these measures and the government was forced to resort to ever more complex electricity rationing measures. A day after the June 5th order came to an end, a new order was issued by PSPCL, prescribing timings during which industries in different zones of Punjab could get access to electricity. These orders remain effective till June 15th. No one knows if normalcy would return thereafter.

This has bred resentment among industrial consumers. One flour miller in Khanna (in Ludhiana) district told Open: “Earlier, the meter would be located inside our premises. So the units of power lost between the pole and our meter were borne by the PSPCL. Now they have installed the meter on the electricity tower, so the loss in electricity has to be borne by us when ideally the measurement of loss should begin at the point where we receive power. This alone means a loss of 50-100 units of power per day for us.”

The economics of electricity in Punjab makes for grim reading. The sector that has always been at the forefront of populist politics in the state suffered badly in 2020. With the Covid-19 pandemic, industrial consumption of power decreased while that of residential consumers went up. In effect, the more paying consumers used less while the subsidised ones consumed more. This dented PSPCL’s finances. At least this was the picture presented before Punjab’s power regulator, the Punjab State Electricity Regulatory Commission (PSERC).

The reality is more complicated, however. A large part of the problem is due to the high level of subsidy in the sector that has to be paid by the state government but one that it is unable to meet fully. In 2020-21, the total subsidy owed by the state government to the power utility was Rs 16,774 crore. The government only paid Rs 9,656 crore, leaving a shortfall of Rs 7,117 crore. Of this, the lion’s share (Rs 6,484 crore) went to subsidise electricity for farmers. This is expected to balloon further to Rs 6,735 crore in 2021-22. The total subsidy, including the money not paid in the previous year (2020-21) will reach a tidy Rs 17,796 crore. As of now, it is not clear how the state government will cough up this money.

The real scandal, however, is not the quantum of subsidy but the extent of cross-subsidisation by paying consumers, largely the harried industrial sector of the state. Cross subsidisation is defined by the regulator as the difference between average realisation per unit from that category and the average cost of supply per unit. The regulator estimated that, for the coming year, the most pampered class of consumers will be farmers who use electricity to pump water for irrigation. The cross subsidy: a whopping (-)12.05 per cent. These farmers are effectively paid by other consumers like those with non-residential supply (24.21 per cent), large supply (10.10 per cent) and bulk supply consumers (19.84 per cent).

It is worth noting that if AAP is voted to power, Kejriwal’s promise of 300 free units of power to all households will mean further subsidisation of that set of consumers. Domestic supply is cross-subsidised to the tune of (-)11 per cent in Punjab. It is difficult to calculate the blow to Punjab’s badly hit power sector from these 300 free units. But one can calculate what it will cost the state’s exchequer to supply these 300 units to individual households. The pooled cost of power—basically an estimate of what each unit of power costs Punjab, keeping in mind all sources from where the state gets electricity—is Rs 4.54 per unit, making the cost per household Rs 1,362. This may not seem much but when one considers the lakhs of households in the state, this “small” amount will blow a big hole in the state’s finances.

It is not as if these issues are not known to the state government or the regulator. In January this year, PSERC held a meeting of its state advisory committee where a number of experts representing the interests of various stakeholders discussed the issues threadbare. Speaker after speaker highlighted the deteriorating finances of the power utility, the continuing troubles of paying consumers and the poor shape of power generation plants in the state. One bit of data was interesting. The chief managing director of PSPCL, A Venu Prasad, stated that there was “nil” growth in power consumption. This should be seen with the political attempts to expand the number of consumers who don’t have to pay for what they consume. Politicians want to encourage this trend even as the woes of PSPCL continue. The new dimension in this election cycle is the attempt to mollycoddle domestic consumers of electricity to balance the dominant political class of the state: farmers. The ones who are left behind are the ones who bear the brunt of cross-subsidisation, the negative effects of farmers’ blockades and, of course, outright denial of electricity that is diverted to farmers. The industrial class is the true wretched of the earth in Punjab.

While this state of affairs is ruinous for Punjab, it strikes a chord across the state. It is here that Kejriwal and Sidhu have shrewdly guessed that their moves, including promises on electricity, resonate with the people.

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Siddharth Singh and Amita Shah