Nitish's Bihar acts bold while Adityanath's UP inches towards populism

Bihar announces steep hike in power rates; UP offers free power

Uttar Pradesh (UP) and Bihar – two of the most under developed states in the country – have been similar in a lot many ways. Be it the slow pace of development, subsequent populist governments and, for years, being treated as a ground for just political gains. The two states also delivered electoral verdicts surpassing the imagination of the best political pundits. 

Then there are dissimilarities. While Bihar offered its reins to Nitish Kumar who had brought development in the languishing state, UP chose the Narendra Modi-led Bharatiya Janata Party (BJP) government, which has promised unprecedented development in the state.

So, when the newly appointed UP Chief Minister (CM), Yogi Adityanath, made headlines by taking 50 decisions in one week – from banning illegal slaughterhouses to constituting Anti-Romeo squad – his announcement on power rates came as a shocker. The CM announced free electricity to below poverty line (BPL) households and subsidised power up till 100 units of Rs 3 per unit. The young power minister of the state, Shrikant Sharma, also announced 24-hour power supply to four holy cities – Ayodhya, Mathura, Varanasi and Gorakhpur.

At the same time, Bihar announced a 55 per cent increase in power tariffs across slabs. The final power tariff would range in Rs 5.75-8 per unit in ascending order of usage. Interestingly, the tariff hike for the rural population has been much steeper than for the urban populace — close to 175 per cent from existing rates. This is also the first time ever that the state, or for that matter any state, has approved such an upward tariff revision.

In contrast to this, during the Samajwadi Party (SP) regime, UP signed power purchase agreements carrying an average rate of Rs 5.5 per unit. Under the previous government, the state also signed a memorandum of understanding for power distribution reforms under the Ujwal Discoms Assurance Yojana (UDAY). This came at a time when the state was staring at a debt of Rs 54,000 crore.

Meanwhile, Bihar, which has cracked down on the vicious circle of subsided tariff, had a minuscule debt of Rs 3,000 crore.

Bihar's state government has cited UDAY guidelines in approving the tariff hike. On the other hand, the UP government is promising to expedite the technological improvement in last-mile power distribution. However, for a state which is yet to see a financial turnaround in its discoms, such promises are long shots.

On the other hand, Bihar has shown the way for all other states, which gave away electricity at nil rates to a large section of subsidised population and reeled under losses for years. When UDAY, which is the fourth attempt to turnaround the distribution sector, was initiated, the cumulative debt of the country's discoms was Rs 4 lakh crore — the highest exposure for the banking sector.

One of the key issues during the UP campaign was power. Jibes were exchanged between the erstwhile SP government in the state and the BJP. The discrepancy in rural electrification in UP also took a political turn with the Centre accusing the state government of communalism and the latter ducking them with fictitious claims.

While the new UP government is claiming that it will provide round-the-clock power by 2019, Bihar has already cracked the whip. The state authorities have claimed that the tariff hike would be reduced subsequently as the discoms start making money to stay afloat.

UDAY envisages financial and operational turnaround of the discoms. Under the scheme, one of the first steps for the state government is to take over the debt of the discoms and issue bonds against it. While this cleans the financial slate of the discoms, future financing would depend on their operational performance.

While both states have been equally successful in issuing bonds, Bihar has taken the lead in steps taken to reform the whole system. While Kanpur is eyeing a smart grid and Varanasi has shown the way for underground cabling, an overhaul is still missing. Further, UP tops the list in energy theft and power transmission losses. On the other hand, Bihar has taken strict steps against offenders of power theft. 

Offering free power takes the rhetoric in the opposite direction of what the BJP government promised with UDAY. UP's populist measures are bound to be hailed by the public. The Bihar government, for its part, is already facing brickbats. The truth, however, is that Bihar's bold move of tariff reforms should ideally inspire more states, most importantly those with a similar economic situation, such as UP.