WITH three-year government rescue package coming to a close, the highly indebted state of Rajasthan is getting tough — it’s demanding farmers start paying for their electricity.

    In a country where rural communities have become used to free power by hook or by crook, the state that is home to some 70 million is tasking private firms with running power distribution in its big cities as it tries to recoup what it’s owed.

    Restructured power distribution debts alone amount to a quarter of Indian banks’ problematic loans, and Rajasthan’s state-run utilities owe about 610 billion rupees (US$9.2 billion), with some 30 billion rupees due by end-March. While Rajasthan dropped an earlier plan to actually raise existing tariffs after opposition from farmers, state energy minister Pushpendra Singh said the state must push on with plans to enforce existing payment rates.

    “We can’t repay the interest and we still have these losses,” Singh told Reuters in an interview. “Every year we are losing more money,” he said, estimating a third of Rajasthan’s electricity is lost to theft and transmission leaks.

    With these debt levels echoed across the country, Indian states have little choice but to find ways, extreme or otherwise, to face up to a long-ignored problem. Bad debts aren’t just threatening banks — with electricity utilities central to the problem, Prime Minister Narendra Modi’s electoral promise of power for all could be jeopardized.

    Reserve Bank of India (RBI) warned in June that the risk of states failing to repay loans on time was “very high,” as a three-year rescue package launched in 2012 comes to an end — the source of Rajasthan’s urgency on collecting fees for electricity. And the central government has identified the power utility sector as critical to solving banks’ bad debt problems.

    (SD-Agencies)