Power supply crisis slows down GDP by 1-1.5 pc

New Delhi, Apr 18: The increasing power supply constraints has led to lower productivity in the small and medium enterprises resulting in a loss of one to 1.5 per cent of GDP annually, industry chamber CII said here today.

It added the lack of supply of one unit of electricity creates a loss of output to the economy between Rs 15-25.

''The shortage of power supply is severely impacting the productivity of small and medium enterprises in the country, hitting the GDP growth,'' CII Chairman SME Forum Ravi Poddar said.

The cost of power at Rs 4.50 or Rs 4.90 per unit for consumption upto 100 and more than 100 units respectively greatly impacts the cost competitiveness of the SMEs, he added.

A survey done by CII on 'Supply of Power and Competitiveness of SMEs in India' says that problems of SMEs on account of supply of power are in fact bigger than the credit problem being faced by this sector as it adversely affects both the resource productivity as well as profitability of this critical segment of the Indian industry.

In order to facilitate subsidy to rural electrification and get rid of mounting debts, government has fixed the electricity rates and duties at an high level for the industry thereby increasing the cost of production and hampering cost competitiveness.

The state government imposed a cess of 15-20 paisa per unit on the generation of captive power in the budget 2004 -2005. It would help if this cess was removed altogether, CII stated.

According to estimates, if the Government checked, even by one per cent, the transmission and distribution losses, which in some states run upto 40 per cent, it would fetch them about Rs 70 crore.

The chamber said since commercial losses account for a major share in AT&C &xD;losses in power, the industry needs to enable the process of meter reading and emerge as responsible citizens which will facilitate in improving the present power situation to the SMEs both in terms of keeping tariffs low and ensuring reliable and quality power supply.

The survey revealed that lack of proper information on power shedding, arbitrary imposition of penalties and poor maintenance of electricity department offices add to the woes of the consumers.

To help reduce the adverse impact on SMEs productivity due to the power situation in the country, the chamber suggested that the electricity tariff should be low and comparable to the other competing countries, incentivise SME's sector to use alternative energies like solar and bio mass in their production process.

It also suggested to make arrangement with distribution companies to have pool from large organised industries surplus power to supply to local areas SME's through cluster based approach.

Besides, a reduction in the electricity duty and power cess would lower the burden on the industry, the chamber said.

UNI