Power to the people

Free electricity for Delhi consumers calls for fiscal prudence

The AAP government in Delhi has some achievements to its credit like the improvement in the condition of government schools, success of Mohalla Clinics and free water for those who consume up to 20,000 litres every month. Pledging commitment to the party’s core constituency ahead of state Assembly polls due early next year, Chief Minister Arvind Kejriwal has now announced free electricity for domestic consumers using up to 200 units a month. For those using between 201 and 400 units per month, 50 per cent subsidy will be allowed, a decision of import, for an estimated one-third of the consumers use up to 200 units, the figure going up to 67 per cent in winter.  

Power sector reforms had been a factor for the success of Kejriwal’s predecessor Sheila Dikshit. The AAP had then alleged that the high tariffs were unjustified. The policy was tweaked last year so that less affluent families, the party’s main vote bank, could benefit more. Economists regard electricity as a public good, required for a certain standard of living. Considering its essential nature and the costs involved, the government steps in to make it accessible and ensure the success of its policies. A line has to be drawn on how much the state exchequer can be burdened with freebies. For policy makers, subsidy is an enabler, not the driver for the use of electricity. In agriculture, for example, power subsidy is invariably used to tap groundwater with its concomitant effects, especially with a scheme like the Own Your Tubewell (OYT) in Punjab, but it is the crop pattern that is regarded as the factor behind the demand. Putting restrictions on its use will not limit it, such is its nature.

Much like positive discrimination, subsidy is essential but it should reach only those who need it. LPG subsidy is being gradually reduced and senior citizens are now getting messages on rail tickets that their 43 per cent concession is a burden. Populist measures may win popular support but fiscal prudence will be required to offset its adverse effects.

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