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HomeIndiaGovernanceSiddaramaiah govt’s free power plan could 'cost Rs 12,000 crore/year, increase consumption'

Siddaramaiah govt’s free power plan could ‘cost Rs 12,000 crore/year, increase consumption’

‘Gruha Jyothi’ & 4 other schemes have got ‘in principle’ approval, estimated to cost exchequer Rs 50,000 crore. Karnataka has 2.1 cr domestic consumers, of which 1.26 cr are BPL households.

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Bengaluru: The Siddaramaiah-led Congress government’s promise of providing 200 units of free power will cost the Karnataka exchequer a staggering Rs 12,000 crore a year, state officials and experts have told ThePrint. 

Although the finer details are still being worked on, the ‘Gruha Jyothi’ scheme — an electoral promise first announced in January — guarantees up to 200 units of free electricity per month to eligible households.

Karnataka has 2.1 crore domestic consumers, out of which 1.26 crore are Below Poverty Line (BPL) households, according to a senior government official.

Government officials and experts ThePrint spoke to said the average domestic consumption is 68 units and the new scheme is, in fact, likely to lead to an increase in power consumption and higher tariffs. There is also the fear that the scheme would discourage investments in the sector.

According to a senior government official, even the figure of Rs 12,000 crore was a conservative estimate.

“This calculation is based on the assumption that consumption will remain the same. But this is a recurring expenditure and will fluctuate if consumption increases,” the official, who didn’t want to be named, told ThePrint. “If this scheme kicks in, 85 per cent of consumers won’t pay anything.”

Hours after he was sworn in on 20 May, Chief Minister Siddaramaiah approved five government schemes including ‘Gruha Jyothi’, that his party had promised before the election. The schemes are estimated to cost the exchequer Rs 50,000 crore.

“I’m confident that without entrapping the state in debts and without pushing the state into financial bankruptcy, we will implement all the guarantee schemes,” he told reporters after holding a cabinet meeting soon after taking oath. “When we are paying Rs 56,000 crore (annually) as interest on our loan, can’t we spend Rs 50,000 crore for our people?”

But according to experts, even if only half of the state’s total consumers are considered eligible for the free power scheme, the financial burden on state’s power sector would still be significant.

The Karnataka government already gives power subsidies of over Rs 14,500 crore to the agriculture sector, according to officials. Experts say that the additional Rs 12,000 crore will take the state’s power commitment to over Rs 28,000 crore/year.

According to media reports, the state’s financial liability is Rs 5.64 lakh crore. In addition, the state owes power supply companies Rs 50,000 crore, according to officials.

M.G. Prabhakar, an energy expert and former advisory council member of the Karnataka Electricity Regulatory Commission, the state’s power regulator, called the scheme “ill-informed” .

“Unless the industrial activity and corresponding paying class of consumers does not increase, the burden on the government will increase enormously,” Prabhakar told ThePrint. “Where are they going to generate that money? We are all talking about energy conservation. Will this move encourage anyone to consume any less?”

A senior Congress leader and minister in the Siddaramaiah Cabinet admitted to the impact this would have on the state’s finances. “The manifesto committee and other leaders have factored in the financial impact of free power. The details are being worked out. But we will fulfil this promise,” the minister told ThePrint, requesting anonymity.

Although an official order on implementation of the scheme is awaited, both the electorate and Opposition parties such as the Bharatiya Janata Party (BJP) are now hoping to hold the Congress to its promise.

On the day of the assembly election results, a viral video purportedly showed residents of Jalikatte village in Chitradurga district refusing to pay their power bills citing the government’s “promise”. Meanwhile, BJP MP from Mysuru Pratap Simha has reportedly asked people not to pay their electricity bills from 1 June if they consume less than 200 units.

Also Read: Electricity or schools? Roads or hospitals? Why it isn’t easy for Modi to fix ‘freebies’

Could scheme reverse gains made?

An electricity-starved state only seven years ago, Karnataka now has a surplus of power — much of it because of the state’s push for renewable energy. 

According to government data, agriculture accounts for the highest power consumption in Karnataka. This is followed by domestic consumption at over 25 per cent. In addition, the Karnataka Electricity Regulatory Commission (KERC) has estimated that 12.95 per cent of total electricity generated in the state in 2023-24 could be lost during transmission and distribution.

This figure, according to energy expert Prabhakar, is already high. “That is the percentage that does not even generate even one rupee,” he said. “Now add 200 units to this.”

On average, renewable energy contributes around 51 per cent of Karnataka’s power needs, while the rest is covered by hydro (12 per cent), nuclear (3 per cent) and thermal (34 per cent), according to state government data.

The power sector contributes nearly 9 per cent of Karnataka’s Gross State Domestic Product (GSDP), the state government official quoted earlier, said. But the new policy now threatens to reverse the gains of the last few years.

This is because of the limitations of renewable energy — given that it’s subject to vagaries of the climate and poor power storage facilities, the actual generation of renewable power is significantly less than the 30,000 MW of installed capacity, one official told ThePrint. 

Government officials fear that the ‘Gruha Jyothi’ scheme could undo the advantage the state has in the power sector and discourage investments. 

In addition, with the cost of Liquified Petroleum Gas rising, officials and experts also believe there could be an increase in the use of other electrical equipment — such as induction cookers — leading to greater demand for electricity.

Already, power tariffs in the state are rising. In March this year, the KERC announced a 70 paise hike in electricity tariff due to higher costs of coal transportation. The tariff hike increased monthly power bills by at least Rs 150. 

The state’s energy department has held at least two rounds of meetings with the newly-elected chief minister, who has been told about these concerns, officials said.

‘Could also impact state’s power infrastructure’

During its election campaign, the Congress made five major promises besides the ‘Gruha Jyothi’ scheme. It announced Rs 2,000 a month to each woman head of household, financial assistance of Rs 3,000 to unemployed graduates, and Rs 1,500 for diploma holders.

It also announced a scheme to provide 10 kg of foodgrains for BPL households and free bus travel for women.

While the new Congress government has already given its ‘in principle’ approval to all five guarantees, the finer details of the schemes — including their eligibility criteria — are still being worked on.   

“We are in the process of working out modalities of implementing the programme,” Kapil Mohan, the additional chief secretary of Karnataka’s energy department, told ThePrint, but refused to provide more details. 

The power scheme will not only add to the state’s financial burden but could also have an impact on the state’s power infrastructure, according to former energy minister V. Sunil Kumar.

“If the government gives 200 units free and does not pay electricity supply companies on time, then the latter will drown. The lost income will also impede building of new sub-stations and new lines that is essential to fulfil the growing demand,” Kumar, a BJP legislator from Karkala, told ThePrint.

The promise of free or subsidised power is not unique to the Congress government, however — the last few years have seen a rise in political parties announcing such doles across India. 

Last May, the BJP government promised to provide 75 units of free power to the state’s  increased Scheduled Caste and Scheduled Tribes population — up from 40 units it was providing then.

“The Congress government says that it will charge the full tariff for all those consuming above 200 units but even when it was just 40 units, people refused to pay when the consumption was higher. This led to accumulating of losses to the tune of Rs 1,000-1,500 crore/year,” Kumar told ThePrint.

In February, Kumar’s ministry entered into an agreement with Uttar Pradesh to borrow up to 400 MW of power whenever Karnataka faced a shortage.

This is a no cash deal and the power Karnataka draws from UP has to be returned in July, Kumar told ThePrint.

The BJP has been demanding that the new Congress government implement its guarantees soon. “Only the announcements were made but no dates announced for the implementation of the guarantee schemes. They have said it would be discussed in the next cabinet meeting,” former CM Basavaraj Bommai told reporters on 20 May.

He further said: “That means the decision was only to disappoint the people. Five guarantee schemes would cost Rs 50,000 crore. The new CM has not thought about arranging the resources for the fulfilment of the guarantees.”

(Edited by Uttara Ramaswamy)

Also Read: You thought power subsidy is a Delhi-Punjab problem? Check out Tamil Nadu’s power sector mess


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