The farm sector and the domestic consumers absorb more than half of the total power produced. But they contribute less than 20 per cent of the total revenue and are cross-subsidised by their industrial and commercial counterparts. Of late, growing fiscal burdens have made states reluctant in expanding subsidies for electricity. But political compulsions have prevented upward revision of tariffs for the politically sensitive categories. As a result, cross subsidies have multiplied in volume.
Similar situations prevail in several other parts of the country.
A growing economy has a growing demand for power. The efforts to augment generating capacity are surely welcome. But in the absence of distribution reforms, restructuring measures in generation can t be successful. By approaching reforms without eliminating supply distortions, certain power producers have been given excessive protection. The outcome of such protection can be heavy fiscal burdens for both the Centre and the concerned state, as is evident from Maharashtra.