'Power subsidies more efficient'

Direct cash subsidies would be more efficient than a 'free' power supply regime for farmers. Under the free power system, farmers end up paying much more in indirect costs.

"It is an area of concern. It is a sad situation that more and more states are offering free power to farmers. We will take up this issue in the energy policy. Free power is not actually free. Farmers pay much more in terms of indirect costs like low quality of power and other related infrastructure," Member, Planning Commission, Kirit Parikh, told reporters on the sidelines of the 7th India Power Forum.

Parikh is chairing the expert committee on energy set up by the prime minister, which will come out with a draft Energy Policy by February 2005.

Reforms in the power sector have not been very successful and the results have been less than satisfactory, he said, adding free power has been a "setback" for reforms process.

Suggesting that instead of free power, a flat rupee subsidy should be given, Parikh said free power encourages unmetered power consumption which aggravates the ill health of electricity companies,. he added.

There should be a system where at least we know how much power is being consumed, Renewables are important from the energy security point of view, particularly in view of the high oil prices currently prevailing.

However, we should get rid of the subsidy culture which has slowed development of the sector and provide an incentive structure to develop technologies, plants and markets, Parikh said.

Earlier, addressing the conference power minister PM Sayeed said states were allowed to provide free power under the provisions of the Electricity Act, 2003 but they had to compensate the utilities from their own budget.

Sayeed said the government was taking a number of initiatives to improve the health of the state utilities.

The Electricity Act had revived the interest of private players in the sector, he said, adding 11 private projects aggregating to about 4,000 mw had achieved financial closure during this calender year. Many state-owned utilities have also achieved financial closure, he added.

The power ministry was also finalising National Electricity Policy, National Tariff Policy, Rural Electricity Policy and guidelines on competitive bidding. All these policy documents would be in place within the next few months, Sayeed said.