As Punjab gears up for a high-pitched Assembly election in early 2022, power subsidy has emerged as one of the most crucial poll promises, so far.
After Delhi Chief Minister and Aam Aadmi Party (AAP) supremo Arvind Kejriwal on 29 June promised up to 300 units of free electricity in Punjab, Congress leader Navjot Singh Sidhu has now urged his party to adopt a similar model.
The issue has sparked a political and an economic debate in the state with Chief Minister Captain Amarinder Singh saying that the AAP model has failed in Delhi, and voters in Punjab won't be 'fooled by Kejriwal's false promises'. The Shiromani Akali Dal (SAD) has also called it a move to 'exploit voters' as the state is already staring at a power crisis.
In this report , we shall try and answer the following questions:
Why and how has the subsidy on power supply become a political issue in Punjab?
What impact will the promised power subsidy have on state exchequer?
Populism in Punjab Politics
Over the years, political parties across the ideological spectrum in Punjab, have used subsidies as a tool to lure voters.
In fact, the SAD, which is now criticising Kejriwal's promise, first offered free electricity to farmers under Parkash Singh Badal's stint as chief minister between 1997 and 2002.
In 2002, when Amarinder Singh took over as the chief minister, he drew criticism from the farmer community in the state for partially doing away with this subsidy. Since then, no government has made any significant changes to the power subsidy schemes in the state.
The Quint spoke to Tridivesh Singh Maini, political analyst and faculty member at the OP Jindal School of National Affairs, who closely watches Punjab. Maini told us that populist schemes have dominated the political landscape in the state since the late nineties. However, people are now yearning for a stronger regional force and a transparent government.
"Till about 10 years ago, populist schemes in themselves were a key factor in Punjab politics. However, other factors are also at play now, and Kejriwal might not benefit a lot by offering these doles. People on ground are more aware, and there is this debate on whether populist schemes offered by the AAP government in Delhi can be replicated in Punjab or not."Tridivesh Singh Maini, Political Analyst
Maini further adds that voters in Punjab are increasingly looking for a regional alternative to mainstream parties. "The suspicion around the AAP in Punjab is the fear among voters that the party runs as per a high-command culture where leadership in Delhi calls the shot. Subsidies can help, but several other factors are now playing a decisive role in Punjab politics. People are yearning for a strong leader who can safeguard the state's interests."
At present, the Punjab government is providing 200 units of free power to over 17 lakh Dalits, families belonging to the backward classes, and those below the poverty line.
The Economic Cost of Power Subsidy
Power subsidy in Punjab has long been seen by experts as a burden on the state exchequer.
According to the 2020-21 budget document of Punjab, the state is reeling under a debt of Rs 2.81 lakh crore, which is 46.3 percent of its Gross State Domestic Product (GSDP). This is further expected to reach Rs 3.73 lakh crore by 2024-25, as per a report by Comptroller and Auditor General of India.
In 2018-19, power subsidy bill crossed Rs 10,000 crore and the government was not able to clear a fiscal balance of Rs 5,000 crore. The total subsidy payable for the financial year 2021-22 is Rs 17,796 crore, which is nearly 10% of the state's annual budget.
Providing up to 300 units of free power to domestic consumers in Punjab will cost an additional Rs 9,000 crore.
Speaking to The Quint, Dr SP Sharma, Chief Economist at the PHD Chamber of Commerce and Industry in New Delhi, said the state is already under a lot of financial pressure – and subsidies are not helping much.
"As an economist, I will suggest that there must be direct benefit transfers to those who need subsidies. In the current system several people who do not need subsidies also benefit from them. In Punjab, overconsumption by subsidised sector has led to a power crisis in non-subsidised sectors. At this juncture, I believe direct benefit transfers are our best bet, considering we cannot do away with subsidies completely."Dr SP Sharma, Economist
Currently, power up to 300 units is priced at Rs 5.84 per unit in Punjab.
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