Power cross-subsidy to continue

In what could be a trade-off with the Left for going ahead with the disinvestment in Bharat Heavy Electricals Ltd, the United Progressive Alliance government has circulated a Cabinet note to amend the Electricity Act, 2003 to allow for continuation of cross-subsidisation of power tariffs.

"Elimination of cross-subsidies is only a theoretical issue. Total elimination is not possible in a country like India, where poverty is a serious problem. Even in countries like the United States, cross-subsidisation exists for rural electrification in the form of preference power," said an official, adding that the power ministry found the Left's arguments valid.

The Electricity Act says that cross-subsidisation will be reduced gradually, and eliminated eventually. But the Left parties had objected to the provision on elimination. Left leaders had taken up the matter with Prime Minister Manmohan Singh and had several rounds of discussions with Power Minister PM Sayeed.

The Centre has also agreed to the Left's demand not to shift the onus of rural electrification on states. The amendments to the Electricity Act specify that rural electrification will be the joint responsibility of the Centre and states.

On the issue of unbundling of state electricity boards (SEBs), which the Left parties had objected to, the power ministry has said that the deadline for this can be extended through a notification.

"The electricity policy and tariff policy (to be sent to the Cabinet shortly), will be finalised by the Centre. State electricity regulatory commissions will have to come out with directions corresponding to these policies," said an official.

The Bill to amend the Electricity Act is expected to be introduced during the monsoon session of Parliament starting July 25.

Last year, the Left parties had asked the Centre to review the Electricity Act, 2003, saying that public ownership and control were desirable in the power sector as electricity supply was a utility service whose control could not be dictated by market forces in a developing country like India.

They had also said the Act made a distinction between rural and urban areas. "This, along with the mandate to eliminate subsidies and cross-subsidies, would have serious implications for agriculture, powerlooms, streetlights, water works and 75 per cent of the rural population. The Act, if not amended, would divide the masses in rural and urban areas," the note sent by the Left parties to the Centre had said.