Finance Commission wants Punjab to stop power subsidy

December 5th, 2008 - 2:46 pm ICT by IANS  

Chandigarh, Dec 5 (IANS) In a rather stern message to the Akali Dal government in Punjab, the 13th Finance Commission has asked the state government to do away with “unsustainable” power subsidies.The commission even went to the extent of telling Punjab Chief Minister Parkash Singh Badal to act as a “senior national leader” and take a leadership role in addressing this issue.

Debt-ridden Punjab gives free power to thousands of farmers and below-the-poverty-line (BPL) families in the state. The free power costs the state government Rs.26 billion (Rs.2,600 crore) annually.

The populist ‘free-power’ scheme has bled Punjab, rendering it unable to purchase power from other states to meet its own demand. Most areas in Punjab reel under six to 10 hours of power cuts throughout the year.

The commission, led by its chairman Vijay L. Kelkar, is currently in Punjab to hold meetings with the state government top brass and visit parts of the state for an on-the-spot assessment of development at the ground level.

Commission chairman Kelkar told the state leadership that a major source of fiscal stress for Punjab was the “unsustainable power subsidies”.

“I request the chief minister, as a senior national leader, to take a leadership role in addressing this issue,” Kelkar told a meeting here Thursday.

The previous Congress government announced free power for farmers in 2002, and the present Akali Dal regime continued it.

The state, which contributes over 50 percent of foodgrains, mainly wheat and rice, to the country’s national pool, has the majority of its population in rural areas, most of them engaged in farming.

The commission’s thinking about the power subsidies is in consonance with the views of Punjab’s Finance Minister and Badal’s nephew, Manpreet Singh Badal, that the state cannot be among frontrunner states till it does away with subsidies, especially free power.

Punjab used to be the country’s leading state economically but now lags behind several states after business came to a standstill during the ‘terrorism years’ between 1982 and 1995.

The state’s growth rate (around 5 percent) is below the national growth rate (a little below 8 percent) despite it having a high per capita income and low poverty ratio.

While the chief minister has demanded a ’special agriculture and industrial package’ to bail out Punjab from its ever-mounting debt, the commission has not made any commitment in this regard.

The commission has also asked Punjab to make its tax collection effective and introduce new taxes to generate more revenue for itself. Punjab presently does not have taxes like property and professional tax.

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