The budget process is covered by live TV and extensively by most newspapers each year. Most large companies have their own analysis of the budget. Increasingly, there is an effort by civil society groups to analyse the budget to decipher the allocations to the social sector. All of this is hugely important and indeed necessary for greater scrutiny and analysis by citizens across the country.
But we at PRS have often spoken about the role of Parliament in effectively scrutinising the government. If there is anything that the Parliament must scrutinise carefully each year, it is the budget – because this is the way in which the government expresses its real priorities. Even if the Parliament passes Bills on any subject – right to education, right to health, right to food, etc. – a good measure of the true willingness of the government to implement any of this can be seen by how much money it is willing to allocate to make things a reality.
Former Finance Minister Yashwant Sinha spoke about the budget process (Times of India, Feb 27th) and has argued that the current process in India is archaic and is in urgent need of an overhaul. He also points that Parliament has little power to change anything in the budget, and argues that this undermines the principles of our Parliamentary democracy. We agree.
On our part, we have produced two documents to help readers understand the budget process better. How to read the union budget and the Union Budget process can both be accessed from our website. And we would greatly appreciate your comments on this and other posts on our blog.
Reports suggest that a debt restructuring plan is being prepared for power distribution companies (discoms) in seven states - Uttar Pradesh, Punjab, Rajasthan, Haryana, Andhra Pradesh, Tamil Nadu and Madhya Pradesh. According to some estimates, the combined outstanding debt for discoms is Rs 2 lakh crore. Discoms have been facing heavy losses. According to a Planning Commission Report, the cost of supplying electricity increased at a rate of 7.4 per cent annually between 1998-99 and 2009-10. The average tariff has also increased at an annual rate of 7.1 per cent over the same period. However, the report shows that the average tariff per unit of electricity has consistently been much lower than average cost of supply per unit. Between 2007-08 and 2011-12, the gap between average cost and average tariff per unit of electricity was between 20 and 30 per cent of costs.
Average cost and average tariff per unit of electricity (Rs per kWh)
|
Year |
Unit cost |
Average tariff per unit |
Gap between cost and tariff |
Gap as percentage of unit cost |
| 2007-08 |
4.04 |
3.06 |
0.98 |
24% |
| 2008-09 |
4.6 |
3.26 |
1.34 |
29% |
| 2009-10 |
4.76 |
3.33 |
1.43 |
30% |
| 2010-11 |
4.84 |
3.57 |
1.27 |
26% |
| 2011-12 |
4.87 |
3.8 |
1.07 |
22% |
Source: “Annual Report 2011-12 on the Working of State Power Utilities and Electricity Departments”, Planning Commission State discoms have been losing money due to higher costs than revenues, as well as high transmission and distribution (T&D) losses. The commercial losses for discoms in India (after including subsidies) increased from Rs 16,666 crore in 2007-08 to Rs 37,836 crore in 2011-12. Reports suggest that the restructuring plan being prepared will be worth Rs 1.2 lakh crore in short-term liabilities. Half of the proposed amount would be issued as bonds by the discoms, backed by a state government guarantee. Banks and financial institutions would reschedule the remaining Rs 60,000 crore of debt, with a moratorium of three years on payment of the principal amount. State governments that adopt the financial restructuring plan would not recover any loans given to discoms before they start showing profits. Under a proposed transition finance mechanism, the central government would reimburse 25 per cent of the principal amount of bonds to states that fully implement the plan. Also, states that achieve a reduction in T&D losses above a targeted level in three years may be given grants. Newspaper reports also suggest that states will have to prepare plans for eliminating the gap between the average cost and average tariff per unit of electricity.
