The short-lived Government of AAP had ordered that
20 Kilo Liters (KL) water be made available free to every household having a piped connection. Those consuming more than 20 KL would, however, have to pay full charges for the entire amount as at present. This policy is no different than the distribution of subsidized food grains, free schooling, Indira Awas and other freebies practiced by successive governments. This freebie distribution is not economically sustainable because the financial burden will increase and crowd out developmental expenditures on roads etc. That will, in turn, hit at growth and push down the Aam Aadmi. Secondly, the increased consumption by the Aam Aadmi, though desirable from the social standpoint, will still be an additional burden on the nature which is already much stressed. Therefore, what is needed is to move towards cross-subsidization instead of freebie distribution.
The rich must be taxed to provide relief to the poor. Cross-subsidization does not put additional burden on the finances of the government because the money paid out as subsidy to the Aam Aadmi is recovered from the rich. It also does not put additional burden on nature by securing reduced consumption by the rich due to increase in price paid by them. Following this practice, the railways charge more from AC Class to subsidize travel by ordinary 2nd class passengers.
AAP Government had ordered that free water will be provided to all consumers. Instead, relief to the Aam Aadmi can be provided by increasing the rates of water for commercial consumers. The maximum price of water for commercial consumers is about Rs 120 per KL in Delhi against Rs 800 per KL in Chennai. The high price for commercial consumers has encouraged businesses to buy sewage from the Municipal Corporation in Mumbai. They buy sewage, treat it and use the treated water for industrial purposes because it is cheaper. The rates for commercial consumers can similarly be increased in Delhi. The price charged from large domestic consumers can also be raised. These bring revenues which can be used for providing free water to the poor.
The more pressing problem is that of access by the poor. Only 62 percent households of Delhi are getting piped water in their homes according to a study by the World Bank. These are the poorest of the Aam Aadmi. They have to pay a heavy price to private suppliers. Priority should be on providing piped connection to these households. Free water for the relatively better-off 62 percent can wait. By focusing on free water the authorities are defocusing on laying infrastructure for reaching piped water to these 38 percent households.
As far as environment is concerned it does not matter whether increased consumption is due to supply to the poor or to the rich. Delhi is being supplied in large measure by Tehri Reservoir. It is suspected that increased evaporation from the reservoir has contributed to the making of the disaster at Kedarnath last summer. Large number of villages along the rim are subsiding. Aquatic biodiversity has been reduced downstream. Water quality at Rishikesha and Haridwar has deteriorated. The monetary value of these environmental costs is not factored into the cost of supply of water. Thus, free supply of water will encourage people to consume more water and impose greater cost on the people living in Uttarakhand. This cost is surreptitiously imposed upon the Aam Aadmi living in Tehri. Aam Aadmi of Delhi is making merry at the cost of Aam Aadmi of Tehri. It is necessary to attain a balance between the two mutually contradictory objectives of providing relief to the poor and protecting the environment. A way out would be to increase the price of water to account for the environmental costs and provide cross-subsidy to the small consumer. That will both provide relief to the poor and protect the environment.
The issue of electricity is somewhat different though the basic issue remains the same. Here an additional factor of possible bleeding by Discoms and power generation companies is involved. Hydropower has nearly the same environmental impacts imposed by the Tehri Reservoir. Thermal power is not better. Radiation from thermal plants causes many diseases among the people living nearby, discharge of hot water in rivers is killing fish, disposal of fly ash is destroying valuable agricultural land and carbon emissions are leading to global warming. This cost is presently not factored in the cost of thermal electricity and surreptitiously imposed upon the Aam Aadmi living in Sonbhadra in UP. Aam Aadmi of Delhi is enjoying cheap power at the cost of Aam Aadmi of UP.
Thankfully it seems that the voter has recognized that freebies are not what he wants. The UPA won power in 2004 on the platform of Aam Aadmi; and retained power in 2009 on the basis of farmer's loan waiver and MNREGA. Subsequentsly the Food Security Act has been promulaged providing cheap food grains to BPL households. Right to Education Act aims to provide free education. But these do not appear to be cutting much ice with the voter anymore. His focus has shifted to the twin issues of development and corruption. Freebies are ineffective wheter it is free water of AAP or subsidized food grains provided by UPA. This is a welcome development because the model of free distribution is fundamentally flawed as shown above.
Vol. 46, No. 39, Apr 6 - 12, 2014