A. Selvan, who works as a contract driver in Chennai, gets a bimonthly electricity bill of around Rs 800. If it were not for the Tamil Nadu government’s power subsidy for domestic consumers, he would have had to pay thrice that amount, around Rs 2,500.
Tamil Nadu, like many states in India, supplies free or subsidised power to certain categories of consumers, primarily domestic and agricultural users. Gujarat, Haryana, Himachal Pradesh, Karnataka, Punjab and Uttar Pradesh are the other states that offer variable subsidies to different categories of users.
While subsidised power is useful for Selvan and consumers like him, it inflicts massive losses on power distribution companies (discoms) and affects their ability to pay power producers. Most states have logged huge delays in payments to producers.
How can discoms be protected from substantial losses without impacting consumer interests? Removing power subsidies and tariff rationalisation has figured in policy discussions for many years, including during a prime ministerial review meeting in May 2020. But the most workable solution lies in a two-pronged approach–governments should invest in building community-sized renewable energy plants, while quickly shutting down old coal plants, experts tell IndiaSpend.
If discoms follow this strategy, they would make a one-time investment in setting up community solar and wind plants, which will supply power to a neighbourhood that will own and maintain the facility.