No thing called free electricity – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-editorial/no-thing-called-free-electricity/articleshow/88697000.cmsSynopsis

The ground reality is that nearly a fifth of the power supplied nationally is simply not billed. State power utilities remain financially moribund. This rampant populism comes at a huge national cost.

There’s a rising clamour among political parties to make free power a poll issue in the upcoming Uttar Pradesh and Punjab elections. Never mind that the electricity sector is characterised by rampant revenue leakage, sheer populism and a host of policy challenges. The political executive, which says it walks what it talks, needs to step up power sector reforms, improve realisations, and policy-induce a modern all-India power market with efficient tariffs.

There is nothing called a free lunch or power. The electoral promise of routine no payment for the non-poor is reckless populism. It misallocates scarce resources even as much-needed investment, upgradation and modernisation get the short shrift in this hugely capital-intensive sector. Gratis power distorts demand patterns for critical resources like water, and have huge, avoidable fiscal implications. Punjab has been providing free power for agricultural purposes for over two decades now. The fiscal burden has been enormous, with the result that the relative size of the state domestic product is now much smaller from a national perspective than it was two decades ago. Freebies bear a heavy price.

The ecological costs of fast-rising groundwater usage and the attendant fall in water tables is also a serious concern. Besides, gratis power has meant high cross-subsidies in commercial and industrial power tariffs, which further distorts demand patterns and usage. The end result is stultified realisations across the board. The ground reality is that nearly a fifth of the power supplied nationally is simply not billed. State power utilities remain financially moribund. This rampant populism comes at a huge national cost. Note that India‘s per-capita power consumption is pitiful, barely 1,200 units annually, far below the global average. The way forward is to mandate cent per cent budgeting of subventions, prepaid metering and direct benefit transfers in power. We need to plug in for modern efficient power market design immediately. And finally give up on reckless giveaways.

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