April 21, 2022
Good morning. In today’s either/view, we debate whether Aam Aadmi Party’s free power scheme in Punjab is viable. We also look at the creation of a DNA database to investigate crimes in Himachal Pradesh, among other news.
📰 FEATURE STORY
Is AAP’s new free power plan in Punjab good economics?
It’s that time of the year again. As summer kicks in and temperatures soar, several places in India will experience a relatively common phenomenon – power cuts. Air conditioners, coolers and fans are people’s only respite. Across India, states are bracing themselves for an increase in power demand.
In the state of Punjab, the newly-elected Aam Aadmi Party has a plan. It announced 300 units of free electricity from July 1. It was one of the promises made by the party during the campaign for the Assembly polls last month. The party wants to capitalise on and replicate its Delhi governance model in Punjab. While the scheme will help lakhs of consumers lower their electricity bills, is it bad economics?
Context
First, some history on this announcement. Last June, Delhi Chief Minister Arvind Kejriwal made an important announcement in Chandigarh. He said if the AAP came to power in Punjab, it would provide free electricity up to 300 units, waive all pending bills, and provide the state with a 24×7 power supply.
Nine months and 92 assembly seats later, the AAP announced the power scheme for the state. It came as the government completed one month in office. Here’s what it entails – since Punjab has a two-month billing cycle for electricity, 600 free units will be distributed over the billing cycle starting July 1. If the consumption is more than 600 units, a general category consumer will have to pay for the total power consumption.
There’s another category to note: scheduled and backward castes, families below the poverty line (BPL), and freedom fighters. For them, if consumption exceeds 600 units over the cycle, they’ll only have to pay for the excess units, not the entire thing.
Power cuts are commonplace in India. The imbalance between power demand and supply isn’t new. Over the years, governments have tried to address the issue but seem to fall short. As India’s population grows, combined with increased urbanisation, higher power demands have strained the finances of states and distribution companies.
Inflation has come into the picture now. Several raw materials and finished products have witnessed a steep price hike in the last few months. Among those is coal. In December, the Power Ministry issued an advisory to coal-based power plants, asking them to mix existing stock with imported coal. Last month, it issued a circular which stated it won’t be possible to give more coal than on a proportionate basis.
For the financial year 2022-23, the Delhi government is projected to spend ₹3,250 crores on subsidies to households that consume 400 units every month. It will subsidise power for more than 43 lakh households. The AAP is hoping to replicate its Delhi model for power in Punjab. Will the scheme pay economic and political dividends in Punjab?
VIEW: Promises kept for people’s benefit
When Kejriwal made this particular poll promise, it was termed another ‘freebie’. However, free power has a quantifiable impact on economic growth. An uninterrupted power supply is a basic requirement. For those who don’t have significant economic means and have to worry about every rupee earned and spent, this scheme can help them leverage its benefits.
Enhanced access to power supply has an effect on economic growth. A 2020 UC Berkley study showed a connection between per capita electricity consumption and per capita GDP. For India, a 2018 OPEC study showed 1% increase in electricity consumption can lead to a 0.77% increase in long-term economic growth. For Punjab, more than 62 lakh consumers will benefit. That’s 82% of the state’s domestic consumers.
The Delhi model has incentivised consumers with low tariffs and subsidies. Its GDP grew 7.7% between 2015 and 2020. It also doesn’t encourage wasteful energy use as it demands a full price if it exceeds 200 units. Over the past five years, Delhi’s power sector has seen a steady decline in regulatory assets to ₹8,377 crores. This has ensured cheap tariffs for the consumers. It’s the cheapest in the country. It has helped improve the financial health of distribution companies.
Here’s something else that happens when people are incentivised with such a scheme – they sign up for legal power connections. That leads to a decline in transmission and connection losses for the power sector. As Kejriwal touted the Delhi model, he stated how the power sector turned around for the better.
COUNTERVIEW: Bad economics for the state
The scheme might be good politics as it probably helped the AAP win Punjab, but that doesn’t mean it’s good economics. In general, it’s a pattern of ‘freebie culture’ that’s become common in Indian politics. The AAP is at the forefront of this. There’s something reckless about spending taxpayer money on freebies. Unfortunately, there are no recognised laws, policies, or sanctions from the courts.
Announcing a scheme like this ahead of the polls is a cynical way of winning votes. In a 2013 judgment, the Supreme Court said the distribution of freebies goes against the concept of free and fair elections. But putting the politics aside, it messes up a state’s finances. As policy analyst Uttam Gupta wrote, freebies affect a state’s budgetary position in an unplanned manner.
Punjab’s finances aren’t in good shape. The government has inherited debts of nearly ₹3 lakh crores. Last month, the AAP government presented an interim budget of ₹37,120.23 crores. A significant portion of this, ₹4,788.2 crores to be exact, will be used to repay loan interests. The government’s answer on how it will pay for its schemes is to increase revenue generation through cutting expenditure and checking tax evasion.
According to government officials, Punjab’s power subsidy bill for 2020-21 was ₹10,668 crores. Of this, a little over ₹7,000 crores was spent as subsidies to farmers. The AAP is already looking to see where it can cut costs and is mulling excluding farmers from the scheme. If this scheme is implemented, the state’s exchequer will have to bear an annual total subsidy of ₹5,500 crores. The AAP has its work cut out. Achieving 100% success in plugging the leakages is easier said than done. Also, this isn’t the only scheme the AAP has in store, making the managing of finances only more complicated.
What’s your opinion on this?
(Only subscribers can participate in polls)
a) The AAP’s free power scheme for Punjab is good for the state.
b) The AAP’s free power scheme for Punjab is bad for the state.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
Hindu-tva to Hindi-tva, the idle pursuit
For the Left:
Provocation theory will be the death knell for not just Hindus but also Indian democracy
🏴 STATE OF THE STATES
DNA database (Himachal Pradesh) – Himachal Pradesh is the first state to initiate a DNA database. It will be used to investigate crimes and identify victims, missing persons, and unclaimed bodies. The Directorate of Forensic Services bought DNA profile databasing and matching technology worth ₹55 lakh. It has a capacity of 20,000 which can be scaled up. DNA profiles can be maintained where authorities can search the database to find matches and leads.
Why it matters: In 2019, the Lok Sabha passed the controversial DNA Technology (Use and Application) Regulation Bill, 2019. It proposed the setting up of a national DNA database to help investigative agencies. Recently, the union government’s proposed legislation to collect information from convicts and suspects came under criticism from the opposition and others. At least 69 countries have such a database, including Canada, the USA, and China.
Cosmos Malabaricus project (Kerala) – The Cosmos Malabaricus project, jointly implemented by the governments of Kerala and the Netherlands, will soon begin. It’s being implemented by Kerala’s Council for Historical Research, the National Archives of the Netherlands, and the University of Leiden. Its aim is to shed light on the state’s history in the 18th century, written in Dutch in the 17th and 18th centuries. As part of the project, documents from the Ernakulam Archive will be studied.
Why it matters: During Chief Minister Pinarayi Vijayan’s 2017 visit to the Netherlands, he saw Dutch maps and documents of Kerala kept at its National Archives. At the time of the king and queen of the Netherlands’ visit to Kerala in 2019, there were reports of wanting to digitise and preserve them. This was when the idea for the Cosmos Malabaricus project came to be.
Probing ropeway incident (Jharkhand) – The Jharkhand government has formed a four-member committee to investigate the ropeway accident at Deoghar. The head of the committee will be Principal Secretary of finance Ajay Singh. It will hire experts and submit its report in two months. 63 people were stuck in cable cars in mid-air as two of them collided. It took nearly 45 hours to recuse everyone. A likely cause was the pulley of the ropeway being dislodged.
Why it matters: The operators of the cable cars said the contract for the ropeway was awarded to Damodar Ropeways and Infra Limited by the state tourism department. The company’s general manager said such incidents are rare and will be investigated. He also refuted allegations that the ropeway wasn’t being properly maintained. Some locals said it hadn’t been maintained since 2019.
Hub for traditional medicine (Gujarat) – WHO Director-General Tedros Adhanom Ghebreyesus said the WHO Global Centre for Traditional Medicine (GCTM) in Gujarat will help boost traditional medicines. He said there are examples of traditional medicines being transformed into modern medicines while facing challenges like lack of data and evidence. Last month, the WHO and the Indian government agreed to set up the Centre in Jamnagar. It will be supported by a $250 million investment from the central government.
Why it matters: Approximately 80% of the world’s population uses traditional medicine. 170 of the 194 WHO member countries have reported using traditional medicines. Their governments have asked the WHO to create a body of evidence and data on traditional medicinal practices and products. For millions, traditional medicine is their first option for treatment.
Entry of the TMC (Assam) – Mamata Banerjee’s Trinamool Congress (TMC) has begun the formation of its Assamese unit. It will be called the Assam Trinamool Congress Party. Former Congress state president Ripun Bora will work to help establish the party in the state. He said other leaders from Bengal will join the efforts. Bora is a veteran of the state. He recently contested as a Congress candidate before he resigned from the party.
Why it matters: The TMC is looking to assert itself as the principal opposition to the ruling BJP government in the state. So far, Congress was the only viable alternative. The party hasn’t been able to defeat the BJP. It resulted in several members resigning from the party. Last year, to make inroads into the state, the TMC reached out to activist turned-politician Akhil Gogoi.
🔢 KEY NUMBER
8.2% – The IMF’s new growth forecast for India for the 2022-23 fiscal. It’s a downgrade from its earlier estimate of 9% due to the Russian invasion of Ukraine’s effect on prices and the global supply chain.