Rs 2,000 cr for rural power

RUN-UP TO BUDGET 2005/ Cabinet to finalise the revenue model of the scheme tomorrow

The government is expected to allocate Rs 2,000 crore for rural electrification in the Budget.

The programme, which aims at supplying electricity to all rural areas over the next five years, is to be jointly implemented by the Centre and state governments. Fifty-six per cent of rural households do not have power supply.

A committee of secretaries, including those of power, finance and the Planning Commission, had recently approved the power ministry's revenue model. It envisages an enhanced capital subsidy of 90 per cent, against the current 40 per cent.

At present, 90 per cent capital subsidy is available only to special category states. The proposal was approved in-principle by the Cabinet, which will discuss its revenue model on Thursday.

The power ministry has been asking for decentralised management, proposing that states must be made to agree to a system of franchisees for collecting user charges. This, the states say, can be done by roping in the NGOs and panchayats.

The Planning Commission, which allocates money to different ministries, has specified that, as the programme is to be implemented by states, the funds should be housed in the finance ministry.

The power ministry has, however, opposed the move and is pushing for the inclusion of the corpus in its own budget for 2005-06.

The ministry has argued that the Cabinet approval obtained for the programme specified that Rural Electrification Corporation (REC), a non-banking finance company under the power ministry, will be the implementing agency and therefore, it should house the funds.

The power ministry has pointed out that the REC had researched villages needing electrification under the ongoing rural electrification programme for one lakh villages and one crore households. If implementation was handed over to states, it will be very difficult to keep track of money spent, the ministry argued.

Also, if the fund allocation was to be shifted to the finance ministry, ongoing projects will suffer. The REC had approved 30 projects for electrification of 12,724 villages in 14 districts of West Bengal and 18 districts of Uttar Pradesh, officials said.

Other than household electrification, the programme aims at setting up rural electricity infrastructure for agriculture and irrigation, small and medium industries and social services like health and education. Phase I of the project envisages an investment of a little over Rs 6,000 crore.

Power games

• The Centre and state governments to jointly implement the rural electrification programme
• The power ministry's revenue model envisages an enhanced capital subsidy of 90 per cent, up from the current 40 per cent
• The power ministry has proposed that states must have a system of franchisees for collecting user charges
• The Planning Commission wants the funds for the programme to be housed in the finance ministry, but the power ministry opposes the move