Punjab’s long-standing scheme of free electricity for farmers and domestic consumers may soon face a major challenge as the Centre moves forward with a stringent three-point plan aimed at states struggling to clear their electricity subsidy dues. The state currently offers free power to farmers running tubewells and provides domestic consumers up to 300 units of free electricity per month. The total subsidy burden for Punjab has skyrocketed over the years, with farm subsidies alone rising from Rs 604.57 crore in 1997-98 to around Rs 10,000 crore in 2025-26, and the total estimated subsidy across categories reaching Rs 20,500 crore.
The Centre’s proposed framework offers three options to states. The first requires selling a 51 percent stake in electricity distribution companies and operating them under a public-private partnership. The second involves a 26 percent stake sale along with management control by a private firm. The third allows states to avoid privatization by registering their distribution companies with SEBI and the stock exchange. Although Punjab was not among the seven states initially consulted, there are growing concerns over potential nationwide pressure for privatization.
Farmers and power unions in Punjab have consistently opposed moves to bring private players into the state’s power sector, citing risks to public welfare. The Electricity Amendment Bill-2025, which seeks to revise tariffs and grant private companies greater influence, has faced pushback from unions and civil society. With electricity falling under the concurrent list of the Constitution, both the Centre and states share authority over energy matters, making any unilateral push for privatization contentious.
India currently has over 60 power distribution companies, with 16 already operating privately in states such as Gujarat, Delhi, Mumbai, Odisha, and West Bengal. Analysts suggest that the Centre’s approach reflects a larger nationwide trend towards privatization, signaling a significant policy shift that could affect millions of electricity consumers in Punjab if implemented.
