Power subsidy

THE politically sensitive issue of power subsidy is back in the spotlight. The Centre is keen to roll out reforms for making the electricity sector commercially robust and ensuring affordable supply for all. The Power Ministry recently released the draft Electricity (Amendment) Bill, 2025, and sought public feedback within 30 days. The draft Bill proposes to phase out cross-subsidies within five years; it is estimated that industrial and commercial users are being charged up to 30 per cent above the supply cost to fund cheaper (or free) electricity for agricultural and domestic purposes.

States such as Punjab might find it tough to continue providing free power to farmers and domestic users if the Centre’s privatisation formula is implemented. The border state’s annual farm subsidy burden has ballooned from Rs 604.57 crore in 1997-98 to Rs 10,000 crore in 2025-26. The total subsidy bill, including various categories, is around Rs 20,500 crore. Fearing a heavy loss of votes, successive governments have been reluctant to rationalise agricultural subsidy. The perils of antagonising the farming community are too well known.

The All India Kisan Sabha has opposed the draft Bill, saying that it’s an ‘anti-farmer’ proposal that would lead to “massive privatisation and centralisation of the Indian power system”. The All-India Power Engineers’ Federation contends that the draft allows public sector discoms to operate while permitting private firms to use the same network, thus paving the way for the privatisation of the entire distribution sector. These concerns cannot be brushed aside. The Centre needs to tread warily, learning lessons from the year-long protests against the three farm laws (which were eventually repealed). Rising above political lines, the Modi government should take all stakeholders on board for consultations. Punjab and other states must be nudged to review their subsidy model so that political considerations don’t cripple economic growth.

Editorials