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Explained: The benefits, the cost and the impact of AAP’s free electricity scheme for Punjab

The scheme mirrors the one in Delhi where the AAP government provides free power up to 200 units to domestic consumers and a Rs 800 rebate to those consuming between 201 and 400 units per month.

April 19, 2022 / 03:11 PM IST
Punjab Chief Minister and Aam Aadmi Party (AAP) leader Bhagwant Singh Mann.

Punjab Chief Minister and Aam Aadmi Party (AAP) leader Bhagwant Singh Mann.

The Aam Aadmi Party (AAP) government in Punjab has said it will roll out its scheme of providing free electricity up to 300 units for every household from July 1.

The announcement, one of a number of the party’s poll promises, was made in a video message by chief minister Bhagwant Mann on April 16, marking the completion of one month of the Arvind Kejriwal-led party’s new government in the state.

Mann also said that backward caste and below poverty line (BPL) households, as well as those of freedom fighters, would also get the 300 free units. Until now, these categories get free electricity up to 200 units.

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The scheme mirrors the one in Delhi where the AAP government provides free power up to 200 units to domestic consumers and a Rs 800 rebate to those consuming between 201 and 400 units per month. CM Mann had met his Delhi counterpart and party chief Kejriwal on April 12 to discuss the scheme.

The scheme

On June 29, Kejriwal had announced in Chandigarh that the AAP government would provide free electricity up to 300 units, waive all pending bills and ensure 24-hour electricity in Punjab if it were to come to power in the state.

“Punjab produces electricity but the tariffs are most expensive here. We do not produce electricity in Delhi and yet the electricity rates are cheapest. This is because there is a nexus of the Punjab government with the discoms (power distribution companies). We have to break this nexus like we did in Delhi to ensure we have the cheapest electricity rates here as well,” Kejriwal had said then.

Some nine months later, AAP swept the Punjab elections bagging 92 of 117 assembly seats.

Also, read | Punjab CM Bhagwant Mann announces doorstep ration delivery scheme

Punjab has a two-month billing cycle for electricity supply. This means 600 free units of power will be distributed over a two-month billing cycle beginning July 1 for general consumers. But if the consumption exceeds 600 units in two months, a consumer from a general category has to pay for the total power consumption.

For households under the scheduled castes, backward castes, BPL and freedom fighters’ categories, if the consumption is more than 600 units in two months, they will be charged only for the units exceeding 600.

The benefits

Punjab has about 73.8 lakh domestic power consumers, according to the Punjab State Power Corporation Ltd (PSPCL). Of these about 62.25 lakh consume up to 300 units of electricity per month. The remaining 11.55 lakh households consume more than 300 units a month and hence will be out of the ambit of the scheme. This means AAP’s free power scheme is expected to benefit about 84 per cent of Punjab’s domestic consumers who will not be paying any electricity bills, if the fixed charges are also waived.

The cost

The power subsidy bill for 2020-21 was about Rs 10,668 crore, according to government officials. Of this Rs 7,180 crore was spent as subsidy to farmers. The new government is considering a proposal to exclude the state’s big farmers from its electricity subsidy scheme, according to reports.

The free electricity scheme will mean the state exchequer will have to bear a total annual subsidy to domestic consumers of Rs 5,500 crore, including existing subsidies. At present the state bears an annual subsidy bill of Rs 3,998 crore for domestic consumers. This includes Rs 1,657 crore for 200 free units to 21 lakh scheduled caste, BPL and backward caste households and Rs 2,341 crores for electricity charged at Rs 3 per unit less than the normal rates for various slabs covering about 64 lakh households with a load of up to 7 KW. The free electricity up to 300 units scheme is expected to add around Rs 1,502 crore to the subsidy bill.

The impact

The scheme will reportedly alter power consumption in Punjab where it varies based on season. Consumers who until now consume less than 300 units will not worry about expenses up to that limit, and hence increase consumption. Some households that consume more electricity will try to limit their consumption to avail the benefits up to 300 units a month and thus lead to a decrease in consumption.

What remains to be seen how the government will manage the additional subsidy burden. The government already owes PSPCL about Rs 7,000 crore, according to a recent report. Also, the corporation has been raising loans against its assets to meet its needs. At present the corporation has outstanding loans of Rs 17,500 crore

The Delhi model

In Delhi, the Kejriwal-led government is likely to spend about Rs 3,250 crore in 2022-23 on subsidies to households that consume 400 units of electricity every month. This goes to subsidise power consumption of over 43 lakh households in two categories, those consuming up to 200 units a month and those consuming 201-400 units.

Also, read | Manish Sisodia presents Rs 75,800-crore 'Rozgar Budget' for Delhi

While around 27.7 lakh households that consume up to 200 units pay nothing, another 15.5 lakh households that consume between 201 and 400 units pay 50 percent of the bill with a subsidy amount cap of Rs 800 per month

Gulam Jeelani
Gulam Jeelani is a journalist with over 12 years of reporting experience. Based in New Delhi, he covers politics and governance for Moneycontrol.