ACCI: Finances of PSPCL in distress mainly due to free power regime

Ludhiana, February 5, 2013: PD Sharma, President, Apex Chamber of Commerce and Industry (Punjab) has stated that Punjab’s economy is drowning under the unbearable burden of free and highly subsidised power. 

In a statement issued here today, he added a high level committee of well known economists aided by well known International Agencies have identified the major reasons of this unfortunate situation.  The free and subsidized power is the main culprit for this situation.  It is a well known principle that after diagnosing the illness the disease is remedied.  Unfortunately Punjab is still persisting with ever increasing burden on power Sector.

Sharma said,” In order to understand the various implications of free power we can categorise the burden in three manners.”

He said Punjab government under the Electricity Act 2003 is required to compensate the power utility (PSPCL) for this free power promise budget.  Punjab government has device a way for this.   Electricity Duty which has been very nominal and on specific basis for decades is now almost the highest in the country at 13% of the cost of power on advelorem basis. In addition to this there is octroi of 10 paisa per unit although there is no octroi in Punjab.

Under the Electricity Act 2003 the cross subsidy has to be reduced progressively. On the contrary it is increasing progressively in Punjab. The burden of cross subsidy on power on large consumers has increased from paisa 64.87 per unit in the year 2008-09 to 88.08 paisa per unit in 2012-13.  Cross subsidy is linked with the average cost of power and as such grows in tandem with the increase in average cost of supply every time.

Sharma further said the high cross subsidy surcharge on open access consumers is also defeating the purpose of Open Access provision.  The cross subsidy surcharge on open access consumers in Punjab is at 88 paisa.  In Rajasthan it is 18 paisa per unit, 0 paisa in U.P., 1.18 paisa in Chhattisgarh, 0.52 paisa in Maharashtra, 39 paisa per unit in Gujarat and 0 paisa in H.P.  In Haryana the cross subsidy surcharge is restricted to the 60% of the cross subsidy paid by the relevant category (not full cross subsidy is recovered from the open access consumers).

He pointed out that the wheeling charges in Punjab on open access consumers is also at high at 124 paisa per unit against 22 paisa per unit in M.P. 11 paisa per unit in Gujarat, 51 paisa per unit in Haryana, 23.27 paisa per unit in T.N., 11 paisa per unit in Maharashtra, 1 paisa per unit in Rajasthan, 8 paisa in U.P. and 18.95 paisa in Chhattisgarh.

Sharma  said Punjab has now introduced two part tariff.   According to P.D. Sharma in order to keep the cost of supply at rational and reasonable level the tariff should follow three basic principles.  The demand charges should be on the MDI and not on the Contract demand.  There should be maximum chargeable rate per KWH.  Fix charges should exclude the period when power cuts are applied. Power cuts in Punjab are frequent. These principles were followed in the year 1991-92.

He said unscheduled power cuts in Punjab are norms and not an exception.  Consumers have to bear the heavy cost of this by depending up on captive power.

Punjab government is urged to take notice of this unfortunate situation in order to save the economy, he said.

Sharma said the finances of PSPCL are in distress mainly due to this free power regime. However, the management of PSPCL is braving this grave situation. It has earned national award in reducing the losses.