The power of freebies

Election promises are injurious to the health of government exchequers. While pledges of free power to farmers and bail-out packages are cheap and useful devices to crowbar existing governments out of power, they quickly becomes serious impediments to good governance. This is because good governance necessarily entails wise spending and the pegging down of fiscal deficits. For the new prime minister, this could be one of the major paradoxes he faces, this business of informing politics with sound economics.

In his press conference on Thursday, Manmohan Singh was candid about his opposition to freebies of any kind and spoke about the need to impose reasonable user charges for goods and services provided by the government. But even as he said this, he made an exception of Andhra Pradesh, where a Congress chief minister has just announced sops worth several hundred crore, including free power to 23 lakh farmers. There is no doubt that successive years of drought have caused much misery in interior Andhra Pradesh but making free power available to every farmer could be a recipe for economic disaster in the long term. Studies have shown how free power leads to wastage, not just of power but of resources like water, because pumps are used without thought. Besides it is the prosperous farmer — who can afford user charges — who most stands to benefit from such freebies. In other words, an expensive measure like this may do little to end the misery of the small farmer in Andhra Pradesh.

There is also the chain effect of the freebie phenomenon. The AIADMK government in Tamil Nadu, much commended for the rational administration of its finances, has already chosen to junk economic good sense in the wake of disappointing election results. From now on all farmers in the state will be provided with free power — a rollback that would cost the government an estimated Rs 200 crore. Clearly Manmohan Singh, and his finance minister, will need to address the issue before long and factor in the economic costs of political sops. Indeed, the doctor would have achieved something truly creditable if he gets state governments to heal themselves.