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What Delhi’s power subsidy reveals about India’s revdi culture

That state governments subsidise such large sections of the populace and that so many affluent households are unwilling to give up subsidies, indicates the appeal and acceptance of a culture of doles at both the demand and supply ends of the equation. It is neither a function of household income, of state's finances, nor targeting the deserving

A few months ago, the national capital witnessed the launch of a campaign with the intention of persuading well-off households to voluntarily give up the benefits provided under the Delhi government’s electricity subsidy scheme. As consumers now have to opt-in for availing of the power subsidy, an element of self-selection has been introduced in the scheme that has been derisively dubbed by many as a “revdi”. Be that as it may, this recent campaign sheds light on the intractable problem of subsidies in India.

Under the AAP government’s electricity subsidy scheme, households are classified into two categories — those consuming up to 200 units per month are provided electricity free of cost, while those using between 200-400 units are provided with a subsidy of up to Rs 800 per month.

Now, Delhi has around 57 lakh domestic electricity consumers. In 2021-22, a staggering 46.8 lakh of them had availed of the scheme. Of these users, roughly 30 lakh (or a little more than half of the households with electricity) consume between 0-200 units per month and thus get zero bills. Another 16-17 lakh (roughly 30 per cent of households) utilise between 200-400 units per month and get a subsidy of up to Rs 800 per month. Thus, in total, more than 80 per cent of households with electricity in Delhi used to receive the subsidy.

In September, the AAP government launched an application process for households to opt-in for the power subsidy. By November 15, the last date for applying, 37.3 lakh had opted for the subsidy. This implies that even now, almost two-thirds of all households (66 per cent) will continue to receive the subsidy. Perhaps there is some solace to be found in that it is down from 80 per cent.

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Ironically, Delhi is one of the richest states in the country. As per the Delhi government’s own economic survey, its per capita income was roughly Rs 4 lakh in 2021-22. Assuming a family of four, this implies that, on average, the annual household income should be around Rs 16 lakh. Now, one could argue that the household income distribution is extremely skewed. That the average per capita income is heavily influenced by the incomes at the very top end of the distribution. And that the households at the 51st percentile actually have much lower incomes. But that doesn’t take away from the fact that Delhi’s per capita income is almost three times the national average. It is also home to 43 lakh income taxpayers (5.1 per cent of total taxpayers) who account for around 15 per cent of all direct tax collections in the country.

In such a state, what is a marker of poverty? Of household deprivation? Of determining who should be subsidised by the government?

If electricity consumption can be loosely considered as a proxy for income, then perhaps those consuming between 0-200 units (roughly half of the households) can be thought of as the least well-off. Though not even all of them can be seriously considered to be either poor or deprived. Some will be affluent when compared to the rest of the country.

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Contrast these numbers with those who receive subsidised food under the National Food Security Act (NFSA) — a programme that perhaps aims to cover only the most deprived in society. The NFSA covers 72.78 lakh individuals in Delhi across 17.78 lakh ration cards (ration cards are given at the household level). In 2021-22, around 16 lakh ration cards were used every month to avail of the entitlement. Thus, if the provision of subsidised food under the NFSA is a marker of deprivation, by that metric, only 16 lakh households or much less than a third of the households can be considered poor.

But even this estimate is a multiple of the “actual poor” in Delhi — only 9.91 per cent of the population, or 16.96 lakh persons to be precise, were below the poverty line in 2011-12 (the last year for which data is available). A decade later, the numbers would be considerably lower. Yet, those who receive subsidies are many times greater.

Unfortunately, this is just one example of the subsidy architecture that exists across the country that is neither a function of household income nor of the state’s finances. Nor is it temporary or targeted at the most deserving.

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Take the case of Punjab. In August 2021, only 3.73 lakh households in the state received free power. But, in August 2022, after the AAP government implemented its poll promise of providing free power, this number rose to 23.08 lakh as per data accessed by The Indian Express. By October, the number of households had risen to 28 lakh — seven times higher than before. The state has 55 lakh households and a debt-to-GDP ratio that exceeds 50 per cent.

That state governments subsidise such large sections of the populace, that so many affluent households are unwilling to give up subsidies, indicates the appeal and acceptance of a culture of doles at both the demand and supply ends of the equation, though perhaps for different reasons. It also suggests that the notion that at higher levels of income, demands of the electorate would shift away from seeking the provision of basic necessities, which would in turn change the incentives of the political class, perhaps doesn’t hold.

But, even as rich states like Delhi, which don’t support a large agricultural population, are beginning to find out the fiscal limits of providing free power, it would be naive to expect a complete rollback of free electricity to farmers in the poorer states, no matter the fiscal burden. The political arithmetic simply does not allow for that. And as power-sharing arrangements at the Centre no longer exist and states become the sites of political contestation, such electorally rewarding, but fiscally misguided policies are increasingly gaining traction — from moving back to the old pension scheme to urban employment guarantee programmes to free power. This shift away from fiscally prudent policy choices is a matter of concern.

ishan.bakshi@expressindia.com

First published on: 01-12-2022 at 07:25 IST
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