Maharashtra finance department wants cut in power subsidy

Revenue deficit rises to Rs 26,000 cr for current financial year

At a time when Maharashtra Chief Minister Devendra Fadnavis is looking to roll out the red carpet to investors, the state finance ministry has come out against the power subsidy announced by the previous government.

The state has a monthly subsidy burden of Rs 706 crore since the Prithviraj Chavan-led government, taking a cue from the Aam Aadmi Party government in Delhi, approved, on January 20 this year, a 20 per cent cut in power tariff across categories — domestic, agriculture and industry — for the state-run Maharashtra State Electricity Distribution Company (MahaVitaran) users. With the revenue deficit rising to Rs 26,000 crore during the current financial year — from Rs 4,500 crore earlier — Finance Minister Sudhir Mungantiwar has made a strong case for reconsidering the subsidy.

Of MahaVitaran’s 21.4 million consumers, 14.3 million are residential, 3.7 million agricultural, 1.47 million commercial and 3,70,000 industrial of which 12,000 are high-tension power consumers, with a monthly consumption of one megawatt (Mw) or above.

While approving the subsidy, the previous government had said of the Rs 706 crore monthly subsidy, the government will provide Rs 606 crore while the  balance of Rs 100 crore would be equally shared by MahaVitaran and  the Maharashtra State Transmission Company (MahaTransco). The government had projected an annual burden of Rs 8,472 crore, which was in addition to an annual subsidy of Rs 11,000 crore provided to agricultural consumers and Rs 1,100 crore to power looms.

A state government official told Business Standard: “The finance department has said it will not be possible to spare funds especially for various other development works if the government has to bear the monthly subsidy burden towards relief in power tariff. It is now up to the state Cabinet to take a final call in this regard.” He also said if the government wants to give subsidy for power tariff, it may consider a 40 per cent cut in planned expenditure. R B Goenka, consumer representative, Maharashtra Electricity Regulatory Commission, and chairman, energy forum of Vidarbha Industries Association, said the industrial tariff may go up to Rs 9  per unit if the government withdraws subsidy or reduces it.

“Despite the subsidy, the tariff recovered — especially from the industrial consumers —  is quite high compared to other states. The government needs reduce expenses incurred on employees which is about 50 per cent of the budget,” he said.