Maharashtra govt scraps free power

The Maharashtra government today pulled the plug on free power for the state's 2.5 million farmers while also deciding to stick to the minimum support price of Rs 1,980 per quintal while procuring cotton from farmers in 2005-2006.

The Cabinet has also increased power tariffs for power looms from Re 1 per unit to Rs 1.40 per unit.

A well-placed secretariat official told Business Standard: "The effort is to rectify the tariff rates over a period of time. At least for medium and large farmers in Maharashtra, the tariff of 0.50 paise will be hiked in a couple of years to the Rs 1.10 prescribed by the Maharashtra Electricity Regulatory Commission (MERC)."

The official added: "The Union government has been pressing the state to initiate reforms in the power sector on a war footing, especially in the wake of the acute power crunch in Maharashtra. The state has been pulled up for repeatedly promising to initiate reforms but it has deviated to the other extreme by introducing such measures as free power and higher than market rates for cotton procurement."

Chief Minister Vilasrao Deshmukh told mediapersons today: "Essentially, free power was offered to agriculturists in the state for the last nine months in view of the acute drought-like conditions that prevailed. Though free power will no longer be on offer, we will charge farmers using up to 3 horse power of energy at the rate of 0.20 paise per unit of power. Those utilising above 5 horse power will be charged 0.50 paise per unit. This is way below the MERC-prescribed Rs 1.10 per unit for agriculturists."

Deshmukh added that the low power tariff would be on offer from June 1, 2005, and applicable to farmers who switch to a metering system.

"We have stipulated a time frame of a year for this metering process to be completed in the state. Nearly 15 lakh marginal farmers will benefit from the lower-than-MERC-prescribed power tariffs as they use below 3 horse power. The result of the new power tariffs for agriculturists will mean that the state government will have to compensate the state electricity board Rs 1,200 crore annually instead of the Rs 1,700 crore if free power was continued," Deshmukh said.

The power tariff of Rs 1.40 (the earlier tariff was Re 1 per unit) for powerlooms will mean that that state government will still have to compensate the Maharashtra state electricity board (MSEB) Rs 260 crore annually.

Deshmukh also said that the state Cabinet while deciding to continue the cotton monopoly procurement scheme (CMPS) would revert to the scheme that was followed up to 1994.

"The increased minimum support price (MSP) of Rs 1,980 per quintal will be the effective rate at which cotton will be procured from farmers under the scheme in the current financial year," he said.

Deshmukh said: "The state government has suffered an accumulated loss of Rs 4,008 crore so far under the CMPS. The procurement last year (2004-2005) is expected to result in a loss of Rs 1,600 crore to the state. So far, 211 lakh quintal of cotton has been procured under the CMPS. Owing to the farmers' preference for Bt cotton, a similar bumper crop in 2005-2006 also is expected," Deshmukh said.