Andhra Pradesh is set to become the first state to conform to the controversial provisions of the Electricity (Amendment) Bill, 2020, awaiting the Parliament’s approval.
The YSR Congress government has given the go-ahead for direct cash transfer to the farmers as part of the free power supply scheme and for installation of meters for agricultural pump sets to accurately assess power consumption levels.
The Direct Benefit Transfer (DBT) is one of the key elements of the power sector reforms proposed by the NDA government as reflected in the draft Electricity (Amendment) Bill. However, several states have opposed the new legislation, saying it undermines India’s federal structure and attempts to privatise power distribution.
The farmers’ organisations and opposition parties have opposed the cash transfer method saying it would work against the interest of farmers and ultimately lead to dilution of the free power scheme.
The free power scheme, introduced by the Congress government headed by Y S Rajasekhar Reddy in 2004 in the combined Andhra Pradesh, has been one of the most impactful populist programmes and any perceived attempt to tweak it is bound to evoke strong reactions from the farming community.
“By making the changes to the scheme, the present government is surrendering the energy sector to the central government. States like Telangana, Kerala, Punjab, and Tamil Nadu have opposed the scheme along with other controversial provisions of the draft Electricity Bill,” the President of Andhra Pradesh Rythu Sangham Y Kesav Rao said.
The move to install power meters had also raised suspicion about the government’s intentions, he said.
Brushing aside the objections, the Jagan Mohan Reddy government has issued an order for implementing the cash transfer scheme, making a major policy shift. The bill amount will be directly transferred to the bank accounts of the farmers. This is expected to result in considerable relief for the state’s power distribution companies (discoms), which will not have to wait for the often-delayed subsidy transfers from the government.
The DBT mechanism will be implemented on a pilot basis in Srikakulam district from next month and will cover the entire state from April 2021, the official sources said.
“Since agricultural usages are not properly accounted for, the agricultural feeders will be separated from domestic and industrial supplies and all connections will have to be metered to ensure monitoring of consumption,” the sources said.
Around Rs 1,700 crore has been earmarked for feeder segregation and installing meters in the state and the remaining requirement will be funded through debt.
The agricultural subsidy in the state works out to be around Rs 48,000 per year for every 5 HP pump set, which can irrigate about 5 acres of land. At present, the state government spends about Rs 8,400 crore per year for providing free electricity to nearly 18 lakh farmers in Andhra Pradesh. This amount is being paid to Discoms in the form of power subsidy.
According to the latest decision, the government will not pay this subsidy amount to Discoms from the next financial year. Instead, it will credit the amount for the power bill directly into the account of farmers in the beginning of the month so that they, in turn, would pay the bill to the Discoms.
“The direct cash transfer system will give a sense of feeling that the farmers have been paying for the power consumed and the power distribution companies will not go into the red,” said Ajeya Kallam, Principal Advisor to the Chief Minister.
Allaying fears over the proposed electricity meters, the retired IAS officer said the load on transformers could be accurately determined with the installation of smart meters and sub-stations could adjust to the requirements.
“The supply of electricity can be tracked by installing meters to motors and any problems identified in supply of electricity can be rectified. Short circuits and damages in transformers can be prevented in future by installing smart meters. Discoms will setup meters, switches, and earth wires and there will be no burden on the farmers,” the official said.
A government statement clarified that the farmers do not need to pay any amount for the smart meters or the electricity direct cash transfer scheme.
“Farmers need not pay an additional amount on any additional usage of power. No problems will be raised by using 7.5 HP or 10 HP motors and they will be regularized. Discoms will bear the cost even if the meters are short-circuited or damaged. All unauthorized motors will be regularized,” Kallam said.
The government plans to open fresh bank accounts for farmers to credit the power subsidy directly every month. There are also plans to constitute committees at village level for the smooth implementation of the new policy.
The compliance with the provisions of the central act is expected to help Jagan politically as it will be seen as yet another indication of the deepening friendship with the BJP.
Moreover, by introducing this DBT scheme in the power sector, AP will become eligible to borrow an additional 0.25% of its Gross State Domestic Product (GSDP) under the Fiscal Responsibility and Budget Management (FRBM) guidelines.
In May, the Union Finance Ministry had increased the borrowing limit of states from 3% to 5% of the GSDP for 2020-21, but subject to their carrying out specific reforms.
“The state can borrow an additional Rs 1,500 crore through the implementation of the reform but metering pump sets alone would cost Rs 400 crore,” a leader of the farmers’ organisation said.
Reforms guru opposes
The former chief minister and Telugu Desam Party president N Chandrababu Naidu, credited with introducing power sector reforms and privatisation policy in the combined AP, has strongly opposed the DBT scheme and the central legislation.
“This scheme is a betrayal of farmers. Fixing of meters will lead to countless problems for farmers,” Naidu said.
The CPI M) state secretary P Madhu called for a united struggle opposing the scheme.
“If the government wants power consumption accountability, instead of spending hundreds of crores on smart meters, it can fix meters at substations,” suggested K Rama Krishna, the CPI state secretary.
However, the officials argue that the reform would help empower the farmers to question power utilities to supply qualitative power to agriculture sector.
“The DBT will improve productivity and the living standards of farmers. Moreover, they need not pay anything from their pockets as the state government will deposit the entire amount into their accounts,” a senior official of the power department said.