Aiming The Subsidies Wrong : Delhi’s Electricity Subsidies where the poor get only Rs. 1,000 per year and the rich Rs. 9,000 per year


Aiming The Subsidies Wrong : Delhi’s Electricity Subsidies where the poor get only Rs. 1,000 per year and the rich Rs. 9,000 per year

Delhi is one of the richest states in India, with the highest household per capita consumption of power.

States are taking steps to lower the tariffs unlike Delhi, which is relying only on subsidies. For initial 200 units, Punjab state has reduced tariff by 9.2% in 2015-16 in comparison to previous year,

Similarly J&K has reduced tariff by 7% in 2015-16 incomparison to previous year. Before election AamAadmi Party promised to reduce the electricity tariff through audit of DISCOMS & by improving efficiency in the system.

None of the promisedactions were fulfilled so to hide its failure the AAP government gave subsidies on electricity bills to consumers.

The AAP government budget for 2016-17 had a non-plan budget of 26,000 Cr., implying a burden on taxpayer of almost 6%, as a result of the 400 kWh threshold level.

They allocated Rs. 1600 Cr. for providing subsidy on Power Bills in budget 2016-17 which is more than 8 times allocated for Smart City i.e. Rs. 196 Cr., more than 1/3rd of the total budget allocated for Medical & Public health, and nearly 20% of the total budget allocated for Education.

This clearly shows that the AAP government has been compromising on development efforts due to their failure in brining efficiency in electricity.

The AAP Government has set the threshold for availing subsidies so high that on an average about 80% of households are eligible for a 50% subsidy.

Furthermore, the average household subsidy varies from Rs. 1,000/year (consumers upto 100 units per month) to over Rs. 9,000/year (consumers with average consumption of 300-400 units per month).

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Clearly this shows that the current subsidy design is benefiting the rich more than the poor. Hence, there is a need for an effective and viable subsidy design with a primary focus on helping the marginal or poor.

One of the ways for AAP Government to ensure a better targeting to those who need subsidies the most is to lower the threshold.

For example, lowering the threshold of maximum monthly consumption to be eligible for the subsidy from 400 to 300 units per month results in almost 30% savings while reducing coverage by only about 13%.

As a result of this, Delhi could find at least Rs. 450 Cr. extra, which could be used for other public services or support.

Alternatively, the 450 Cr. could be spread out bottom-up, so the poorer “x” actually get a 70% subsidyinstead of a 50% subsidy.

Thus, by just changing the subsidy rules, the Delhi Government can significantly save money of the Delhi taxpayer or can be further given to poor electricity customers.

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