Letter to the State Chief Ministers – Come together on Electricity and MSP


Respected Chief Minister,

I had earlier addressed you through a series of letters on the range of policy changes introduced by the Centre that amounted to making inroads into the legislative and the executive domains of the States and overstepping the lakshman rekha of federalism that lies at the core of the parliamentary democratic system provided in the Constitution. The relevant correspondence may be readily accessed at the following weblinks.








In the foregoing correspondence, I had appealed to the States to come together and set up a federal front so as to enable the States to persuade the Centre collectively to respect their Constitutional role in enacting laws and framing rules and regulations, consistent with the ground realities in their respective areas.

There are two specific areas of special concern in relation to which I wish to draw your attention in this letter.

  1. Centre’s latest proposal to obligate the States to meet a minimum of 25% of their electricity demand from renewables, scalable to 47% over the 8 years
  2. Implementation of the Swaminathan Committee on Minimum Support Price (MSP)
  1. States to meet a minimum of 25% of their electricity demand from renewables, to be further enhanced to 47% over the next 8 years:

One of the amendments proposed by the Centre to the 2003 Electricity Act seeks to impose on the States an obligation to meet at least 10% of their electricity demand by absorbing renewable energy generated by centralised solar power plants (largely owned by corporate business houses) supplied either directly or through the CPSE, Solar Energy Corporation of India (SECI). Considering the low load factors at which such plants necessarily operate and also considering that the power system already stands asymmetrically skewed in favour of thermal power generation capacity meant to meet the base loads, leading to a continuing fall in its average Plant Load Factor (PLF),  this will impose an undue cost burden on the State utilities, already reeling under a severe financial stress. You are aware of how the Centre has already imposed another cost burden on the State power utilities by issuing a direction that the States should also meet at least 10% of their demand by importing exorbitantly expensive coal from overseas sources, a situation created indirectly as a result of the Centre’s own gross mismanagement of domestic coal supplies.

The Centre has issued several of these directions under Section 11 of the Electricity Act, 2003. While it can issue such directions in respect of the utilities under its own administrative control, it is questionable whether it can issue such directions in the case of the State power utilities.

The State should perhaps question the appropriateness and the legality of these directions, calling upon the Centre to respect the States’ role in such matters and also claim adequate compensation for the additional cost burden imposed on them.

  1. MSP::

I wish to make a special reference to a statement made by the Union Commerce Minister (https://thewire.in/agriculture/why-piyush-goyals-call-to-farmers-to-increase-rice-cultivation-is-misguided) exhorting the States to increase the sowing area under rice, in view of the shrinkage in the area of rice cultivation over the last few years. When he made such a statement, he would not have been fully aware of the factors contributing to the progressive reduction in the area covered under paddy.

Paddy is a highly water-intensive and a labour-intensive crop, subject to the vagaries of the monsoons. The risks borne by the paddy farmer are comparatively higher than those faced by cultivators of the other crops. In the absence of adequate cover provided by the government to hedge such risks, the cultivators are forced to divert their lands for other crops. Considering that rice plays a predominant role in maintaining the country’s food security, the Centre ought to have supported the rice cultivators by announcing a remunerative MSP that not only covers the costs fully but also provides a reasonable rate of return, as for example, based on the recommendations of the Swaminathan Committee on agriculture.

The Swaminathan Committee (National Commission on Farmers headed by Dr. M. S. Swaminathan) has taken these aspects into consideration and recommended that the MSP for a given crop should be 50% over and above the total cost of production, which should be computed taking into account the following three components.

  1. the actual paid-out expenses incurred by farmers, in cash and kind, on seeds, fertilisers, pesticides, hired labour, fuel, irrigation and other inputs from outside
  2. an imputed value of unpaid family labour.
  3. The imputed cost arising from the value of the land deployed in raising the crop, based on the prevailing market value of the land, interest on loans taken on the land and fixed capital assets

It is unfortunate that the successive governments, despite their verbal assurances, are yet to  implement the Committee’s recommendations on MSP. The levels of MSP conceded by the government so far for the two major food crops, namely, rice (Kharif,) and wheat (rabi) remain far below the MSP recommended by the Commission, which additionally takes into account the opportunity cost of the value of the land and the value of the fixed assets deployed in cultivation.

For example, if the Centre were to implement the MSP for rice, as recommended by the Commission, it should not have been less than Rs 2590 per quintal, whereas the MSP announced recently by the Centre falls short of it by Rs 550 or even more  (Commission for Agricultural Costs and Prices)

The question of the Centre adopting the recommendations of the Swaminathan Committee on MSP for important crops, especially the food crops, should be taken up by the States urgently, as it has long term implications for the food security of the country and for sustaining economic growth.

In a way, the three farm laws introduced by the Centre unilaterally and withdrawn under intense pressure from the farmers’ associations, would have effectively done away with the concept of a statutory minimum support price, forcing the farming community to divert their lands to commercial crops which involve greater risks and also forcing the farmers to enter into agreements with private agencies on disadvantageous terms.

Unless the States collectively voice their concerns on this issue, it is possible that the Centre will revive the farm bills to the disadvantage of the farmers.

It may be recalled that the Centre had given a categorical assurance to the farmers’ associations a few months ago, prior to the Assembly elections due then in several States, that it would not re-introduce either the farm laws or the Electricity Bill, without prior consultation with the stakeholders. the fact that the Centre is unilaterally going ahead with the Electricity Bill shows how it has reneged on its assurances. One should not be surprised if the centre also revives the three farm laws.

I appeal to the States to come together on a common front and take up both these issues and, also the other issues raised in my previous correspondence, to safeguard their interests.


Yours sincerely,

E A S Sarma

Former Secretary to Govt of India




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