After months of speculation, the Delhi Government on Monday decided to subsidise power bills for only the low consumption users. The decision means that consumers who use more than 200 units of electricity a month will now have to shell out more on power bills, but industry experts say the move will help the power sector “stand on its feet.”
While the Government has decided to retain the subsidy of Re. 1 per unit for all domestic consumers who use less than 150 MW and 200 MW of power during low consumption and high consumption months respectively, it has decided to withdraw the subsidy announced for all sections following a public uproar over tariff hike in 2005.
“The Government has decided to retain the subsidy only for the agricultural sector and for the targeted consumers who use less than 150 MW and 200 MW during non peak and peak months respectively for another year,” said Power Secretary Rajinder Kumar.
Sources in the Power Department said a general subsidy for all consumers was putting an additional “financial drain” on the already “burdened” Government. “Initially between 2005 and 2007 there was a 10 per cent subsidy being given to consumers, which was divided between the Government and the discoms. While the Government offered 5 per cent, the discoms matched it, but for the last couple of years now the discoms had withdrawn their share and the Government ended up footing the cost,” said a source.
From 2007-2008, the Government decided to pay the difference between the per unit price of power before the tariff hike and after the hike. “The Government was paying 25 paise, 35 paise and 45 paise per unit for consumption between 0-200, 201-300 and 301-400 units. But now the Government is overstrained with expenditure being incurred on various development works, and is struggling to juggle its finances,” the source said.
While the source attributed the withdrawal of subsidy to the restricted cash flow from the Planning Commission, experts in the power sector said the move should be viewed in a broader context. “The first thing that the consumers must understand is there is no subsidy, what we call subsidy is the money that the Government collects as tax and gives it back to us in a different form. Second, if the power sector has to become independent and the privisatisation process taken to its logical conclusion then the subsidies have to go,” said a Government official not wishing to be named.
“In Delhi alone the power situation has stabilised and the losses are being stemmed. The Government has handed over the distribution sector to private companies and gradually withdrawing subsidies is a corollary to that. Withdrawal of subsidy will help the power sector to stand in its feet,” said the official.
The Government will continue to offer a subsidy of Re.1 per unit for all domestic consumers restricting their consumption up to 150/200 units per month in off-peak/peak months and the agricultural consumers would continue to get electricity at cheaper rate of Rs.1.55 per unit less than normal rate.