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Saturday, June 5, 2004

Immediately after being sworn in, our new Chief Minister ordered the supply of tariff-free electricity to farmers along with the waiver of their outstanding, unpaid electricity dues.  This has remained a strongly debated and controversial subject.  But, what are the real issues behind this debate?

Electricity in the agricultural sector is primarily needed for operating motors that lift groundwater and pump it into the fields.  Currently, there are around 2.3 million agricultural pumpsets in our state.   Under the previous regime, the farmers were paying around 22% of the total cost of supplying electricity to their pumpsets in the farmlands.  The power utility companies extracted the remainder from the industries and higher-end domestic users (in the form of cross-subsidies that cover 44% of the costs) and also from the government through direct subsidy (that make up the rest 34%).  Now, under the new government orders, the farmers do not have to pay for the electricity they use, except for a nominal amount of Rs. 20 as ‘customer service charges’.  Additionally, the unpaid electricity dues of farmers have also been written-off.

What does this mean, in financial terms?   Until May this year, the state exchequer used to bear a cost of Rs. 609 crores so that farmers could obtain electricity at subsidized rates.  Supplying the same electricity, but completely free-of-cost, would additionally place a load of around Rs. 436 crores on the state.  The summed figure of Rs. 1045 crores is a recurring, yearly cost.   Also, the government’s decision to waive the past dues of farmers would bring an extra, one-time burden of Rs. 1192 crores.   While these numbers might seem a bit high, we need to put them in proper perspective:  the daily expenditure of our state government alone is on the order of Rs. 125 crores.  In that case, the yearly cost of giving free power to the farming sector would amount to only around ten days of total government expenditure!

However, the question of free electricity is not merely one related to economic or financial policies.   It is indeed much more serious than that.

In the year 2003, only around 47% of the nearly 44,000 million units of electricity purchased by the APTransco was metered and billed.  In other words, less that half of the total electricity consumed in our state last year, can actually be accounted for.  What about the remaining?   It is lumped together under the broad categories of agricultural consumption and Transmission-Distribution (T&D) losses.  Since agricultural consumption is not measured (i.e. metered), no one really knows how much power is really used in the farms and how much is ‘lost’.  The unmeasured term ‘T&D losses’ is generally used as a convenient carpet under which power losses due to mismanagement, corruption, theft and avoidable technical losses are all dutifully swept.  For every single percentage of power loss, our state government loses revenue of Rs. 100 crores. However, some political, bureaucratic and business interests have a vested interest in maintaining this status-quo.  For instance, under the present system, a low level engineer in charge of operations in energy distribution rakes in an astronomical sum of Rs. 2 lakh every month!  Such bad governance practices lead to an unnecessary wastage of over 20% of the total electricity annually consumed in Andhra Pradesh.  Any modern system should be able to completely avoid this enormous loss.

Therefore, one of the immediate tasks of our government is to carefully monitor the genuine power consumption in the farmlands so that the T&D losses can be accurately measured and minimized.  Even the Central Electricity Act (2003) mandates that every service must be metered by the year 2005.   But, metering of power consumption by farmers could be perceived as a politically difficult measure to initiate.  That is why, the government must explain to the general public and the farmers, with complete clarity and honesty, the importance of monitoring the consumption of free agricultural power.  It must be unambiguously conveyed that the intent of monitoring and metering of free power is only to improve the T&D service delivery and not harassing an individual farmland power consumer.

The supply of cost-free electricity to farmers should not remain an end in itself.  It should be used as a valuable opportunity to initiate much-needed improvements to the T&D system and also in the overall power sector.  There are other important benefits: monitoring of agricultural power consumption would also act as an incentive to save both energy and water.  Currently, the efficiency of our agricultural pumpsets is notoriously low, so the farmers tend to use higher power motors.   Not surprisingly, groundwater is depleted faster than the borewells are naturally recharged.  An improved T&D system could therefore, also help avoid potentially severe environmental consequences caused by wasteful energy use and water depletion.

To sum up, the metering of agricultural consumption must have three goals: proper energy auditing and improvement of distribution system; elimination of wastage at the farmers’ level; and prevention of overexploitation of ground water.