The Centre has said that states providing subsidised or free power would have to make budgetary provisions to meet the cost of electricity and asked states to adopt a 'practical approach' on the matter.
"State governments wanting to provide free power must provide for it in their Budget," Power Minister PM Sayeed told reporters after assuming charge.
The new Congress government in Andhra Pradesh announced that it would make available free power to farmers, while Tamil Nadu, which had stopped supplying free power to the agricultural sector, reversed its earlier decision and followed suit.
The Andhra Pradesh government's decision is expected to result in a loss of Rs 300 crore (Rs 3 billion) to the state. Prime Minister Manmohan Singh has also criticised the decision and said user charges were required.
So far, the Centre had not taken up the matter with the Andhra or Tamil Nadu governments in order to avoid a confrontation and would wait till Budgets in the two south Indian states were presented, senior power ministry officials said.
Sayeed said the Electricity Act 2003 permitted subsidy to different consumer segments in a transparent manner through budgetary support by state governments. Officials added that in case the subsidies were not provided for, the Act permitted recovery of dues.
"There are a variety of ways to recover the dues, including tightening of working capital assistance by central agencies like the Power Finance Corporation or recovering it from their accounts with the Reserve Bank of India. But I don't think we will need to go to such extent. If the states do not make budgetary provisions we will take up the matter with them," an official said.
