Financial Daily from THE HINDU group of publications
Tuesday, Nov 16, 2004
Industry & Economy
Karnataka likely to contain power subsidy outflows
Bangalore , Nov. 15
FOR the first time this decade, the Karnataka Government is expected to contain subsidy outflows to the power sector within the targets prescribed in the medium-term fiscal plan.
Power sector subsidies are one of the major reasons for high revenue and fiscal deficits. Consolidated fiscal deficit isestimated at close to 4 per cent of the State domestic product.
Explicit subsidies this year to the power sector are assumed at Rs 1,400 crore. The actual budgetary allocation for the power sector was Rs 1,856 crore for the year, which included support under the Accelerated Power Development and Reform Programme.
But this year, the State Government hopes to contain the subsidy payouts and even beat the targets.
The subsidy payouts are incurred by the State Government for meeting the costs of concessional power supply to the farm sector.
However, there were large leakages in these subsidy payouts. Transmission and distribution losses were still being accounted as agricultural load. These glitches in the State have not been corrected, the sources said. There isstill a substantial gap in agricultural load estimates and actual consumption.
Estimates are that there are at least 14 lakh irrigation pumpsets in the State. Specific consumption by each pump set is estimated at 8,500 units per year. This implies that for at least three months in a year the pumpsets were operating continuously, an estimate that has been contested by the World Bank.
Despite these discrepancies, the sources said, if the State was poised to contain power subsidies, the reality was that agricultural consumption had actually dropped sharply during the year. The reason for this drop in consumption was that few farmers were operating the pumpsets at this time of the year. In fact, agricultural consumption of electricity this year revealed a negative growth.
The sources said, as a result, daily power consumption in the State was down to about 88 million units (MU). Last year, during the same period, agricultural load had pushed up the daily consumption upwards of 100 MU. Last year, to accommodate the agricultural load, the State had resorted to restricting supplies to some of the high tariff sectors including high tension and urban domestic consumers with connected load above 3 kilo watts.
Besides, some of the demands were met by sourcing high cost supplies including drawals from across the State borders and from the discretionary allocations of Centrally-owned power generating stations and independent power producers.
This low farm consumption, the sources said reduced power shutdowns. This year, however, at least 60 per cent of the supplies were sourced from the State's own hydro-electric generating stations, where the average tariffs were less than Re 1 a unit. The balance was being sourced from Central generating stations and the 1,470-MW Raichur Thermal Station. The low consumption allowed Karnataka to maintain grid discipline. Moreover, this year, the State was actually selling power to some of the neighbouring States, such as Kerala, in view of the surpluses. Kerala and Goa together were being supplied close to 2 million units a day. This was over and above the allocation to these States from the Centrally-owned power generating stations.
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