Ear to the ground

Why Punjab's power bills include a cow cess and water charges

Most administrative systems, including tax collection, have collapsed in Punjab. So it has opted for an odd solution.

Last year, the Municipal Corporation of Ludhiana faced a bovine problem.

The city is surrounded by villages rearing cows, and it also has two large dairy complexes nearby with about 70,000 cattle in each. This abundance of cattle in close proximity translates into an abandoned cow problem for the city. As Charanjit Uppal, a health officer at Ludhiana’s Municipal Corporation, says, “When the animal becomes dry or unproductive, they leave it outside.”

The corporation’s response – opening two gaushalas to shelter the abandoned cattle – has led Punjab down an unforeseen path. At present, these house about 1,200 cows. The corporation spends approximately Rs 30 per cow every day, or Rs 1.3 crore annually. And the problem continues to grow.

“The number of abandoned cows is increasing from year to year,” said Uppal. “Even peripheral villages are leaving their animals here, as they know they will be taken care of.”

The solution is to create more gaushalas, but the corporation is cash-strapped. Even at Rs 1.3 crore, said Uppal, “We are paying through our nose.”

In its search for solutions Ludhiana, and other municipal corporations across the state, imposed a cow cess on a host of goods and services. Additionally, as Scroll.in reported last year, these corporations got the Punjab State Power Corporation to add a cow cess to its power bills.

Finding a cow tax in your power bill might seem odd, but the underlying logic is – seen one way – impeccable. People might not voluntarily stump up money for the gaushalas but, as another Ludhiana municipal official said, “Bijli is a compulsion.”

“If we charge a cow cess of 10 paise per unit,” added Uppal, “that will give us an additional Rs 2 crore each month.”

From cows to water

There is more, however. From March 1, the Punjab State Power Corporation will also collect water and sewerage charges, usually collected by municipal corporations themselves, through its power bills.

The logic is akin to the one for the cow cess. Municipal corporations in Punjab are unable to get people to pay their water and sewerage dues. “People are not paying,” said Lakhwinder Singh, a superintendent engineer at Jalandhar’s municipal corporation. “There is no enforcement, and so our arrears are rising.”

As of now, he says, unpaid water and sewerage charges for his corporation amount to Rs 25 crore. “Recovery hai nahin lekin bahut kharch ho jata hain (There is no recovery but a lot gets spent).”

With water, he said, defaults are high as enforcement is low. And even if the corporation disconnects a water line for non-payment, people reconnect it with ease. However, “People do not default on power as the connection gets cut in a month.” Also, he said, there is the risk of getting a shock while trying to jury-rig a power connection.

And so, Singh said, the state assembly has approved a proposal that since “the power bill goes to all houses [and industries] and since everyone pays, the water bill will be collected through the electricity bill” – likely the first time in India that the bills for two utilities are getting clubbed.

One recent evening, Sucha Singh Gill, Director-General of Chandigarh’s Centre for Research in Rural and Industrial Development, explained why Punjab was porting unconnected charges onto its power bills. The soft-spoken economist, now in his sixties, said the system of collecting water and sewerage charges has all but collapsed in Punjab. “Even as the municipal corporations have expanded, there is no accompanying increase in the data about coverage,” he said. “All one has seen is arbitrary arrangements for water supply. In some places, they do not send bills. Elsewhere, people do not pay.”

A part of this collapse, he said, is the legacy of militancy. During the ’80s, most administrative systems – general, police, tax collection – crumbled in Punjab. Even when peace returned, he said, “Politicians never rebuilt those systems. They instead opted for populism.”

Now, prompted by programmes under the Jawaharlal Nehru National Urban Renewal Mission, which requires governments to start collecting charges for expenses like water, sewerage and street lighting – not to mention the already precarious state finances – Punjab needs to start collecting these dues. Ergo, the bundling of such cesses into the power bill.

Making sense of brainwaves

As revenue collection ideas go, this one is suboptimal. For one, given the lack of data about water users (and their consumption), charges will be calculated not on actual use but as a percentage of the power bill. Said KD Chaudhri, the chairman-cum-managing director of Punjab State Power Corporation, “There will be fixed slabs for different levels of consumption” – for example, Rs 20 for 500 units of power consumption, or Rs 50 for 1,000 units.

This is a problem in the making. In such an approach, as former Planning Commission member Abhijit Sen says, there is no link between the quantum of water use and what the user has to pay. Punjab, like the rest of India, is heading towards a future of water shortages, and this billing structure doesn’t help.

There are other issues. According to KR Lakhanpal, a former Chief Secretary of Punjab, India has been seeing a three-way turf battle for years now, between the governments at the Centre and the state, and the local bodies. The decision to use the power bills to collect water charges, says Gill, further increases the dependency of municipal corporations – initially conceptualised as autonomous local bodies – on the state government.

“The water charges collected by the power company will be sent to the state government’s consolidated fund, and the state will then send it to the municipal corporations,” said Gill. “With every new layer, there is the risk of further delays. The autonomy of the corporations suffers.”

It’s not clear if the notification passed by the state assembly defines the period within which the water and sewerage charges have to reach the corporations. Anurag Verma, Punjab’s commissioner for excise and taxation, did not respond to Scroll’s email and phone calls seeking a meeting to understand why the state is loading unconnected charges onto power bills.

What the power corporation thinks

The decision to levy unconnected charges through the power bill tells us a lot about modern Punjab. The state government’s tax collection machinery is in shambles. And so, when strapped for funds, it has turned to the state power corporation which, as its CMD Chaudhri says, does have a 99.9% power collection rate.

Thus, for 10 years now – well before the cow cess and the water/sewerage charges – Punjab has been collecting octroi through power bills at 10 paise per unit. It also charges an electricity duty and an infrastructure cess. The electricity duty, says an official in the state power corporation who did not want to be named, is being levied “because the government needs to mop up more revenues”. The cash from the electricity duty, he adds, is deposited with the state treasury and goes to the state government.

It all adds up. Between them, says the official, octroi, electricity and the infra cess add about Rs 1.27 per unit to power bills in the state. Add the cow cess and the other charges, and that amount rises further. This, as the earlier story on deindustrialisation in Punjab highlighted, results in industry complaining about higher power rates than neighbouring states, and is among the factors decimating Punjab’s competitive advantage.

Even as the state power corporation publicly challenges any assertions about its expensive power tariffs, it privately agrees that the landed cost of power is going up.

What next? Would Chaudhri be willing to collect state housing tax through the power bill? “I will resist it,” he said. “It will result in an incentive for people to default on power payments.”

Chalk that up as yet another downside.

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