Power tariff hike: Failing economy compels Andhra CM to break poll promise

The YS Jaganmohan Reddy government in Andhra Pradesh has gone against his poll promise by allowing power distribution companies (discoms) to recover ‘true-up’ charges — a euphemism for increase in power tariff — from consumers.

Putting additional burden on power consumers in any form is not in tandem with the spirit of the Yuvajana Sramika Rytu Congress (YSRC) government, if one goes by Jagan Reddy’s election promises.

Exactly 21 years back, on August 28, 2000, a protest against steep hike in power charges at Basheerbagh in Hyderabad turned violent, leaving three dead in police firing. It was a major happening which changed the course of state politics. The then Chief Minister N. Chandrababu Naidu continued with reforms in the power sector and hiked power charges and an end to the Telugu Desam Party’s regime.

The protest resulted in the rise of Congress leader late Y.S. Rajasekhar Reddy (YSR), father of Jaganmohan Reddy. YSR deftly took the tide in his favour and launched a marathon and gruelling ‘padayatra’ with a promise to supply power to all at affordable rates. His free power promise also intended to address the distress in farm sector and end the spate of farmer suicides. The strategy worked. The Congress came to power with a landslide victory and YSR became the chief minister.

It may be recalled that the Naidu government’s decision to unbundle the power sector into discoms and gencos (generation companies) as an offshoot of reforms, had resulted in the alignment of anti-TDP opposition front before the 2004 elections. Of course, the front was led by YS Rajasekhar Reddy.

In 2019, Jagan rode to power with a promise to continue his father’s legacy and not to burden power consumers with exorbitant tariffs. But the chief minister of the bifurcated state of Andhra Pradesh, left with empty coffers, drifted away from his father’s path, to raise Rs 3,669 crore in the form of ‘true-up charges’. The Jagan government’s latest decision entails an additional burden of Rs 1.25 per unit on consumers of Southern Power Distribution Company Limited (SPDCL) and 45 paise per unit on users of Eastern Power Distribution Company Limited (EPDCL).

Jagan’s poll promise

The ‘true-up’ charge is the expenditure incurred by distribution companies (discoms), over and above the annual revenue requirement (ARR) of the Electricity Regulatory Commission, due to variations in annual costs and is meant to be recovered from consumers.

CPI (M) state secretariat member Ch. Babu Rao told The Federal that Jaganmohan Reddy took an indirect route — levying true-up charges — to increase power charges, which is against the spirit of his election promise. “The poor will feel the heat more. Households consuming power below 50 units at the rate of 40 paise per unit will have to pay an additional Rs 1.23 for each unit they consume towards the so-called true-up charges,” Babu Rao said, dismissing the official argument that the poor will be unaffected by the government decision.

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Currently, the Andhra government is supplying free power (up to 200 units) for scheduled caste (SC), scheduled tribe (ST) families, barber shops and power looms. Farmers, with over 13 lakh pump sets, also get free power.

Andhra Pradesh Samagrabhivrudhi Adyayana Vedika (AP Forum for the Study on All-round Development) convener T. Lakshminarayana told The Federal that the YSR Congress government had already increased tariffs by Re 1 for some segments of power consumers, such as non-domestic sectors representing industries and commercial establishments. Meter charges too have gone up over the period of time, said Lakshminarayana, who was among those who led the bloody Basheerbagh protests then. He said the Jagan Reddy government’s energy policy is not in line with the policies advocated by his father.

When Rajasekhar Reddy waged a spirited battle against the Naidu government’s so-called power reforms, Jagan, his son, is meekly falling in line with the NDA government’s prescription of reforms, said Lakshminarayana.

Hoping to get relaxations from the three per cent mark of the Financial Responsibility and Budget Management (FRBM) Act for borrowings, the YSRC government expressed its readiness to follow certain prescriptions under the NDA government’s ‘Uddeepana’ scheme, which includes privatization of discoms and reforms in urban local bodies (ULBs). The state government will get some leeway against borrowings in excess of the FRBM limit, if the discoms are privatized. The state can raise Rs 2,500 crore from lending agencies, circumventing the FRBM Act’s limit, if it implements reforms in the energy sector like energy audit in agriculture by installing meters for pump sets.

It is feared that the new Electricity Act, passed by the Parliament recently, will rob states of their discretion to extend free power for agriculture, by bringing the subject of electricity under the Electricity Contract Enforcement Authority. The Centre’s reforms aim to make generation and supply of power reflective of prevailing costs.

Andhra’s financial mess

The state economy is in a precarious condition. The government is not even in a position to pay salaries and pensions to in-service and retired employees. The situation is attributed to indiscriminate freebies offered to different sections of people and lack of prudence on part of the government in public expenditure.

Appointment of as many as 50 advisors is a grim pointer to such a lack of prudence, critics say. The Andhra Pradesh High Court too had questioned the rationale behind the appointment of so many advisors without giving a thought to its implications on the economy. The advisors will get salaries in the range of Rs 1.6 lakh to Rs 3.8 lakh, Rs 50,000 against purchase of laptop or computer, Rs 3 lakh towards furniture and Rs 1.5 lakh for cutlery. Each of them will be allotted a private secretary, a personal assistant, an additional PA, three office subordinates and two drivers. The annual expenditure on advisors is estimated to be around Rs 13-15 crore.

Hike in property tax

Indiscriminate expenditure under various heads forces the government to tax people in different forms, said Lakshminarayana. The decision to implement municipal reforms is apparently one of such desperate attempt. The government aims to convert the present ‘rental value based taxation’ on houses to ‘property value based’ syste, which will mobilize Rs 10,000 crore over a period of three years. Similarly, the government plans to mobilize another Rs 2,500 crore through garbage cess.