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Power subsidy for farm sector hits AP industry hard

Our Correspondent in Hyderabad

Experts and power officials term the farm sector as the villain of the piece for the deterioration in the power supply position as well as the financial health of the power sector in Andhra Pradesh.

The low power tariffs for the farm sector and the burgeoning power consumption by the agricultural pumpsets are cited as the key contributory factors for the all-round sickness gripping the power sector, despite the reforms.

"The subsidised category consumption is growing by leaps and bounds while the consumption by the industrial sector, which has been the milch cow for the power sector, has been on the decline as a proportion of total energy sales. This has landed the APTransco in deep financial straits. The state government, facing a severe resource crunch, is in no position to salvage the situation for the power sector," says a top Transco official.

Citing facts and figures, the Transco official points out that the number of farm connections has gone up almost four-fold in the last two decades. There are 1.896 million agricultural services as on date as against just 443,595 farm services in 1980-81. The sale of power to the farm sector shot up to 9.866 billion units in 1998-99 from just about 915 million units in 1980-81.

On the other hand, the number of industrial consumers doubled to 144,045 in 1998-99 from 55,912 in 1980-81. The power consumption by industrial sector increased to 8.655 billion units in 1998-99 from 3.363 billion units in 1980-81.

Significantly enough, the proportion of industrial sector in total power consumption in the state declined to 26.46 per cent in 1998-99 from 63.07 per cent in 1980-81. The proportion of the agricultural sector rose sharply to 39.59 per cent in 1998-99 from only 18.44 per cent in 1980-81.

The contribution of the industrial sector to the total revenues from sale of power increased to Rs 27.22 billion in 1998-99 from Rs 2.85 billion in 1983-84. The farm sector's share in total revenues rose to Rs 1.54 billion in 1998-99 from Rs 140 million in 1983-84.

The industry associations point out that the industrial sector has been subjected to steep hikes as many as 13 times in the last 25 years, pushing up the basic tariff from 21 paise per unit in 1975 to Rs 3.30 per unit in 1999.

Along with fuel cost adjustment charges and demand charges, the unit cost comes to Rs 4 now. The agricultural tariff, on the other hand, has remained more or less static at an average of 16 paise per unit over the last quarter century. The total subsidy provided to agriculture sector now works out to a whopping Rs 21 billion per annum.

The power officials admit that at the existing rate of Rs 4 per unit, most industries find it more economical to go in for captive generation. In fact, due to the high power tariff and frequent imposition of power-cuts, the industries have set up captive generation capacity of 1,700 mega-watt.

The cost of captive power generation works out to just Rs 2.50 per unit. Many major and medium industries generate power for self-consumption at cheaper cost. This also ensures reliable and quality supply and avoids production losses.

The power sales to the industry sector have remained stagnant in the last five years and the state power grid has lost its capability of cross-subsidising the agriculture sector by further raising the tariff on industry.

"The politicians seem to have succeeded in emaciating the proverbial golden goose of the power sector -- the industral consumers. Now, the losses of APTransco are mounting and the state has no funds to compensate for the subsidy on power supply to the farm sector," bemoans a senior official.

The political parties, conscious of the role of farmers as the biggest chunk of the electorate, seek to pander to their demand for keeping the power tariffs abysmally low for the farm sector. The vote-bank politics, pursued with finesse by politicians like N T Rama Rao and his son-in-law and Chief Minister N Chandrababu Naidu, are at the root of the financial mess that envelops the power sector.

Rama Rao twice brought down the farm power tariff to Rs 50 per HP capacity of pumpsets. Late Dr M Channa Reddy went a step further and ordered free power supply to farm sector in 1990. Chandrababu Naidu, having hiked the tariff for farm sector marginally in 1996, is unwilling to face the wrath of the farmers by increasing the power tariff for the agricultural services again.

K Narayana Rao of the Federation of Andhra Pradesh Chambers of Commerce and Industry says that poor quality of power supply and high power tariff have affected the industrial sector in the state very badly.

For long, industry has been milked to cross-subsidise the farm sector. In every power tariff revision, industry is the first casualty. Industry, which has been the real paymaster for the power sector, is now clamouring to have its own captive generation to escape from the vagaries of state grid power supply and also because the industrial power tariff in Andhra Pradesh is among the highest in the country.

However, Indian Institute of Economics director V K Srinivasan feels that "the agricultural sector covers the inefficiency of the power system. The losses, which otherwise could not be accounted for, are attributed to the farm sector because it gets unmetered supply."

Since October 1996, extensive energy audit is taken up in the state for the first time in the country. The audit has revealed that the commercial losses due to theft of energy by authorised and unauthorised consumers works out to 4 billion units a year worth Rs 10 billion.

The technical losses (otherwise known as transmission and distribution losses or line or transformer losses) have been computed to be around 18 to 19 per cent. All these were otherwise getting included in the unmetered agricultural consumption.

An APTransco official agrees that the power utilities cannot raise the HT power tariff irrationally. The industry can no longer cross-subsidise the farm sector. What the industry wants is cheaper and reliable power supply from Transco.

The official claims that even the farm sector is willing to pay higher tariff provided adequate and quality supply is assured.

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