MSEB to get Rs 786 cr payment as farm subsidy every quarter

The state government is on a tightrope walk on its plans to provide free subsidy to agriculturists in the state, as the cash-strapped state would have to pay a cash component of as much as Rs 786 crore to the state power utility in advance (every quarter).

The state government was directed by the Maharashtra Electricity Regulatory Commission (MERC) to also seek legal opinion from the state's advocate general on whether offering free power would also lead to a loss for the Maharashtra State Electricity Board (MSEB).

The state government proposal placed before the MERC stated that a budgetary provision of Rs 587 crore already existed with a further Rs 895 crore needing to be sanctioned for providing free power to agriculturists owning pump sets in the state for the remaining nine months (from July 1) of the current fiscal.

While the Rs 587 crore provision falls short of the Rs 786 crore that will have to be paid in cash to MSEB before the commencement of each of the remaining three quarters, the fact that MSEB is likely to have a negative outflow of money to the state government means the state will have to pay the power utility in cash.

"MSEB stated that as per regulation it was permitted to make a book adjustment of the amount of subsidy to farmers against the electricity duty it collects on behalf of the state government and the loans taken by it from the state. However, the MSEB also admitted that in the current fiscal, the MSEB was likely to have a negative outflow on this count to the state and hence the government would have to advance it the subsidy amount of Rs 786 core before each quarter," an MERC source said.

The state has till August 23 to submit the legal opinion sought on the compensation for non-repayment of agricultural power arrears, when the MERC will decide upon the issue of sanctioning the power subsidy.