Ongoing assembly elections in five states have seen a flurry of promises from political parties.
The prominent one amongst these is the promise of free or subsidised power for farmers and domestic consumers.

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Free or subsidized power to farmers (sometimes accompanied to the farm loan waiver) is present in election manifestos of each political parties during elections.
According to a report:
1. Free power to farmers accounts for 70% of total subsidies.
2. Free power to the Scheduled Caste, backward caste and BPL families contribute 14%.
3. Subsidized power to industrial consumers constitutes 16% of total subsidies.

Cost bared by the States: The entire cost of electricity that includes the cost of production, the purchase price of power, the cost of distribution and collection is bound by the state government.
Burden on exchequer: Due to free power in Delhi, the total state subsidy amounts to 11% of the total expenses.
States incapacity to pay back: The State governments have to reimburse the Discoms, but given the financial state of the governments, they either defer the payments or delay the payments.
DISCOM failure due to poor finances: As the Discoms suffer from financial shortage their ability to provide service is affected, especially in rural and far-flung areas.
Shortage and outages: This is a key reason for the limited electrification of the industrial and commercial sectors.

Unaffordability: Providing subsidised low tariffs for small consumers is necessary, considering the rising costs of the electricity supply.
Relief in distress: Free or low-tariff power is at best a short-term relief, which should be provided to those who desperately need it.

Free power distorts demand, discourages efficient use and resource management.

Impact on power generation: This makes Discoms unable to pay the generators who are dependent on these finances for the procurement of coal.
Financial burden on end-customers: It leads to industrial and commercial consumers paying cross-subsidy in terms of higher power tariffs to compensate for the under-recoveries of Discoms.
Burden on Banks: Banks are also affected as power generators can’t pay the interest due to which the costs of borrowing also increases.
Tariff Issues: The high tariff also makes the states and the country uncompetitive against the other countries in the global market.
Ignorance to critical issues: The financial implications are immense, undermining a state’s ability to provide critical services such as health, education and basic infrastructure.

The free/subsidized power supply is provided for improving the financial condition of farmers. However, this has led to certain dysfunctions:

Giving free power imposes intergenerational costs in terms of exacerbating water scarcity and deterioration of air quality.

Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan (PM-KUSUM) is an Indian central government-sponsored scheme led by MNRE.
The PM-KUSUM scheme helps Indian farmers in installing solar pumps as well as solar power plants in India.
Under KUSUM yojana, you will have to bear only 10% of the total cost. The remaining 30% will be provided by the central government and 30% by the state government as solar pump subsidies.
In that way, you’ll receive a total 60% subsidy on your solar water pump. The remaining 30% will be financed.

DBT: Eschewing free power is not anti-poor. Electricity-poor households can be supported through direct benefit transfers or prepaid meters.
Cap on usage: The subsidies should be given for a limited number of units and be given in increasing slabs to avoid overconsumption and wastage.
Subsidization: Currently, the subsidies are also extended to the large cultivators who grow cash crops, vineyards, sugarcane and make huge profits.
Concessional tariffs: Fixing concessional tariffs (not below 50% of the discom’s average cost of supply) for consumers with monthly consumption below 50 kWh and connected load up to 1 kW.
Extensive eligibility: Rather than giving the subsidy to the discoms, the expert group proposed the subsidy be paid as a direct benefit transfer to eligible consumers.
Feeder separation: Separation of agricultural meters from non-agricultural meters should be implemented throughout the country.

India needs greater electrification of its economy. It must create the conditions that encourage this.
The reckless and indiscriminate promise of free power prevents that transition.

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