The estimated Rs 250 crore (Rs 2.5 billion) power subsidy for the current fiscal announced by the Maharashtra Cabinet for the scarcity-hit farmers in the state, will have to be forwarded to the Maharashtra State Electricity Board in either quarterly or six monthly installments.

The subsidy, which is for 2002 to 2004, is likely to become payable in a couple of months.

Also Read Power reforms on track

The Maharashtra Electricity Regulatory Commission is currently considering the issue.

Under Section 65 of the Electricity Act, a state has to pay the subsidy in advance. Earlier, states used to pay subsidies at the end of the fiscal.

The state Cabinet cleared the subsidy proposal two weeks back, which allows 100 per cent power bill exemption for farmers living in over 7,000 villages in Maharashtra. The state government had declared these villages scarcity-hit for the last three consecutive fiscals (2001 to 2004).

The Cabinet had also allowed a 66 per cent exemption on power bills for farmers living in over 13,000 villages, which were declared scarcity-hit for 2002 to 2004. This is in addition to a 33 per cent exemption for farmers on their power bills whose villages will be declared scarcity-hit this year.

The subsidies are estimated to cost the state exchequer around Rs 250 crore, said the state principal secretary (energy), Jayant Kawle.

According to Kawle, although the Electricity Act requires advance payment of the subsidy to the MSEB by the state, a bi-annual payment mechanism would be appropriate as the billing cycle for farmers in Maharashtra is six monthly.

"Paying the subsidy a month in advance is near impossible as even making a quarterly payment would be considerably difficult. Moreover, the MSEB annually collects the electricity duty on behalf of the state government and this amount is set off against any such payments the state has to make to the MSEB," he said.

MERC member Pramod Deo said the commission would take a decision on the mode of payment in a couple of months.

What ever may be the MERC's decision, the cash-strapped government would require to pay the subsidy immediately to the MSEB, as the first six months of the current fiscal are already over and the second-half would be well midway when the MERC order is finalised.