The Prime Minister’s emphasis on power sector reforms can also help clean up state finances
Prime Minister Narendra Modi’s concern over the huge losses in the distribution sector has come at the right time. He rightly pointed out that the more electricity is wasted, the more it has to be generated. His remarks on the dire need to reform the power sector — coming after his unease with the freebie culture in general which he denounced a few days ago — seem to indicate the Centre’s growing intolerance of the economic policies which are imprudent and irresponsible. The consequences are for all to see. As per the Union Power Ministry’s estimates, states and Union Territories (UTs) together owe over `1 lakh crore to the electricity generation companies (gencos) and `1.3 lakh crore to the distribution companies (discoms) by the end of the last fiscal. The Prime Minister has launched the Power Ministry’s flagship revamped Distribution Sector Scheme; its objective is to improve the operational efficiencies and financial sustainability of the discoms and power departments. With an outlay of over `3 lakh crore, it is aimed at modernising and strengthening of distribution infrastructure and focusing on the reliability and quality of supply to consumers. This will help in technology upgrade, apart from cutting distribution losses and improving consumer satisfaction. While the revamped scheme is welcome, the real problem lies somewhere else: the reckless manner in which state governments, under various political parties, manage their finances. They indulge in the worst kind of populism (e.g., subsidising pilgrimages and marriages) and atrocious decisions like waiving off farm loans.
While the Centre has refrained from announcing farm loans waivers in the last five years, states have been doing that with impunity. Then there are other sops like free electricity. Evidently, state politicians believe that imprudence has no consequences. But they are wrong: all actions, especially bad actions, have consequences. They have a lot to learn from the recent happenings in Sri Lanka. Leaders in the island nation continued too long with too much of fiscal profligacy and irresponsible economic policies. The denouement: the most prosperous economy in South Asia, with a per capita income almost double that of India’s, is not in ruins.
Such are the perils of imprudence. It is good to know that no less a person than PM Modi is spearheading the campaign against mindless populism and, what he called, the revdi culture. It is also time that public intellectuals and opinion makers woke up to the threat of ever-expanding freebies. They must recognise the fact there is no such thing as a freebie, for all goods and services have a cost. This cost has to be borne by someone; and that someone is inevitably the citizen — as taxpayer. For instance, if a section of society doesn’t pay for electricity, the public exchequer does; and it is the taxpayer who replenishes it. Hopefully, the Prime Minister’s emphasis on power sector reforms will also help clean up state finances.