Farmers worst hit in power distribution clean-up drive

Rates for agri power rise at faster pace than other segments

Across party lines, politicians seem to be in a hurry to show off their pro-poor face. But, it turns out, the power-rate shake-up effected over the past two years has touched farmers the most. A Business Standard analysis of the change in power rates, across states and consumer categories over the past year, shows agricultural power rates rose at a faster pace than those for other categories.

The analysis, based on the latest power ministry data, shows rise in power rates for farmers, connected at the lowest load of 2 Horse Power, or 400 units a month, has been the highest in Tripura (217 per cent), Kerala (125 per cent) and West Bengal (63 per cent) - the three states with a strong Left presence. This seems to indicate the current political regimes in these states might be squeezing farmers' pockets bid to correct a historical tariff imbalance.

During the same period, power rates for households consuming 200 units a month has risen 91 per cent in Tripura, 34 per cent in Kerala and 38 per cent in West Bengal. On an average, a household consumes 200 units in a month. However, a few states like Jharkhand and Punjab, where domestic power rates have grown faster than farm rates, have bucked the trend.

In absolute terms, farm rates saw a steep jump - from 87 paise a unit in March 2012 to 276 paise a unit in March 2013 in Tripura; from 74 paise to 167 paise a unit in Kerala; and from 241 paise to 392 paise a unit in West Bengal (a state seen as one of the few success stories of distribution reforms and known for near-complete metering of agricultural consumption). Bengal is charging farmers as high as 628 paise per unit - the most by a state - at time slots between 5 pm and 11 pm.

The analysis also shows that Gujarat is one of the only three states (the other two are Uttar Pradesh and Uttarakhand) where the government has not raised agricultural power rates in the past year. The Gujarat government, led by Narendra Modi, is often criticised for ignoring the farmers' interest in its economic growth story.

However, power tariffs in the state has remained unchanged, at 173 paise a unit, during the period. In Rajasthan, where the Congress-led state government raised rates thrice in two years, domestic rates increased 18 per cent last financial year, compared with 53 per cent jump for farm rates.

Gujarat's stagnant power rates for agriculture, according to experts, are attributed to the better financial health of the state's utilities when compared with those of other states. Besides, two states - Karnataka and Tamil Nadu - are still providing free electricity to farmers. Tamil Nadu was the first to sign up for the Centre's financial restructuring package (FRP) that binds states to reform measures, including frequent rate revisions, timely submission of accounts and privatisation.

At the national level, the farm sector accounted for more than 22 per cent of power distribution companies' total annual sales of 900 billion units (BUs) in 2011-12. However, the sector contributed only eight per cent to their total revenues, exceeding Rs 3 lakh crore. The subsidy on agricultural sales, which determine the commercial losses of utilities, increased 36 per cent - from Rs 33,300 crore in 2007-08 to Rs 45,500 crore in 2011-12, the latest year for which published official data are available.

In the domestic category, the overall increase in power rates has been below agricultural rates. The highest jump in domestic rates was seen in Tripura, where power rates rose 91 per cent, from 205 paise to 392 paise a unit. It was followed by Jharkhand (Rural), where there was 76 per cent rise, from 155 paise to 273 paise, and Maharashtra (52 per cent, from 406 paise to 616 paise a unit).

Experts say the farm and domestic consumers might be bearing the brunt of rate revisions but they have had the advantage of government subsidies in the past. "With the objective of cost-reflective rates, these consumer groups might witness higher rate hikes than the commercial and industrial groups," said Dipesh Dipu, partner, Jenisse Management Consultants. Deloitte's Amrit Pandurangi also argues the subsidy component ensures farmers pay less than the regulated rates. "But the extent of subsidies might have come down in a few states. All consumers paying more than the cost of producing (and distributing) power are bearing the brunt. And, in an indirect way, it's thanks to banks, which are absorbing half the shock. Also, since banks are owned mostly by the government, the brunt is being borne by the general public," he said.

The rate-hike movement had started across states in November 2011, after an order of the Appellate tribunal of Electricity that mandated discoms to revise power rates annually, or face penalties. The Centre's FRP followed in September last year.