Kejriwal’s optional power subsidy model for Delhiites could be the thin edge of the wedge

Supporters attend an election roadshow by Delhi CM Arvind Kejriwal (unseen) ahead of the Assembly elections, at Shastri Nagar in New Delhi. (File image: PTI)

Come October, Delhiites, hitherto pampered across the board with free power up to 200 units per month subject to a caveat, will have to opt for it expressly. As it is, those consuming not more than 200 units a month are completely spared the burden of paying the bill and those consuming up to 400 units a month get a subsidy of Rs 800 a month.

The Delhi government has allocated Rs 3,250 crore for payment of subsidy under the scheme in 2022-23. In 2020-21, the government had set aside Rs 3,090 crore as subsidy under the scheme. There are 5.8 million consumer electricity connections in the capital.

Domestic consumers who use up to 200 units a month, numbering 3 million, are given a 100 per cent subsidy. There are 1.7 million consumers whose monthly consumption is 201-400 units and who are given up to Rs 800 in subsidy. They are likely to stay on. Prima facie, one may ask what the fuss is all about when the bottom line is going to be status quo.

The option given to financially-able consumers to surrender subsidy is expected to help lower the subsidy amount that has been rising over the years, a senior government officer said. Chief Minister Arvind Kejriwal has said he is implementing this change heeding the demand made by Delhi citizens that the well-off section doesn’t need this subsidy which can be sublimated into investments in schools and hospitals. But the moot question is, will the well-off section disembark the bandwagon cheerfully and voluntarily? They are likely to hedge their bets.

A comparison with LPG give-it-up initiative is in order. In April 2016 the country had 15.34 crore LPG connections, of which 1 crore had given up subsidies. This was a year after the launch of the give-it-up scheme. Lack of update seems to show that the give-it-up has stabilised at the 2016 level. People, as said earlier, like to hedge their bets. Those who stood up for the scheme must be intuitively ruing their decision, with the oil and gas prices going through the roof.

Power consumption peaks during summers in most of India.  It is, therefore, possible that a fair number of Delhiites may be missing their coveted subsidy during summers and getting them during other seasons.  They in particular and those striving hard to stay within the danger mark of 400 units might opt for the subsidy in the hope that they may make the grade during the non-peak season at least. So, the actual number of people pressing the give-it-up button is likely to be very small.

One wonders why people are being asked to opt one way or the other. Given the fact that a very large number of people would like to cling on to the subsidy out of need or avarice, the Delhi government could have spared itself a whole lot of administrative burden and rigmarole by following the time-tested principle of management by exception—those wanting to opt out alone need to bestir as is the case with LPG give-it-up. And one hopes and prays this ritual is a one-off and not every month because otherwise the computer have-nots may have to queue up every month to opt for the subsidy first and join another queue for payment.

Going beyond the minutiae of the new scheme, it appears wisdom has at last dawn on the AAP that freewheeling subsidies are not sustainable. Subsidies must be targeted, period. To be sure, targeting subsidies exclusively at the poor is a painstaking exercise but that is no reason to shower them on all indiscriminately.

This belated realisation could come to haunt AAP more in Punjab should push come to shove and it is constrained to follow suit.  The Punjab electorate is bound to resent even a modicum of rollback of the poll promise of free 300 units power a month, especially so soon in the day. Delhi women could also be deprived of their free DTC rides if the AAP government secularly dismantles all non-merit subsidies.

Universal subsidies make for bad economics. To be sure, in Nordic countries free health and education are given to all but the rich earn it by paying a stiff income tax of 40 percent. In India, direct taxes collections aren’t anything to tom-tom over. Willy-nilly therefore, subsidies have to be targeted as with the PM Awas Yojana. While the beneficiaries from the EWS (economically weaker sections) category are eligible for complete assistance under the scheme, beneficiaries from LIG and LIG categories are only eligible for the Credit Linked Subsidy Scheme (CLSS) under the PMAY. This is as it should be and should form the template for subsidies.

Freewheeling subsidies are no-brainer. The AAP in particular has got the concept of the welfare state wrong. Its functionaries smugly say universal subsidies are kosher in a welfare state. That is wrong. The current proposal makes it look like the AAP is set to usher in subsidies reforms not by disavowal of its discredited views but through grandstanding that it is acting at the behest of people!!

S Murlidharan is a chartered accountant and columnist. 

Views are personal and do not represent the stand of this publication.