White Paper highlights a possible shift in State government’s line on subsidies

The government is mulling over a targeted approach

The White Paper on Tamil Nadu’s finances points to a shift in the government’s thinking on subsidies.

Successive governments have extended the benefits of subsidies to all, at least in such crucial sectors as electricity, water and public distribution system. But the main message from the White Paper is that the government is mulling over a targeted approach towards the subsidy regime.

As of now, there is no immediate change in the policy as Finance Minister Palanivel Thiaga Rajan himself made it clear on Monday. He added that reforms, including the idea of taxing the rich more and using the money for the welfare of the middle class and the poor, had to be discussed first with Chief Minister M.K. Stalin and his Cabinet colleagues.

Immediately after assuming charge, the DMK gave ₹4,000 each in cash assistance to all rice card-holders without making any distinction on the basis of the economic status. But what is significant now is that in a State where freebies and competitive populism are the norm, a government document emphasises the need for re-orientation or rationalisation of subsidies, and for “urgent course correction measures”.

In the area of electricity, the document brings out the government’s discomfort. Though it does not hint at severing the free power supply to farmers, the White Paper reads “NIL” for the recovery from the farm sector for 18% of the energy supplied by the Tamil Nadu Generation and Distribution Corporation. The document has highlighted the fact in bold letters that the Corporation “does not get fully subsidised” for the cost of supply to farmers, which works out to ₹8,225 crore a year. As for the domestic consumers who enjoy 100 units free bi-monthly, the White Paper not only puts the value of under-recovery at ₹18,735 crore during 2020-21 but also states bluntly that “those who consume more electricity are receiving greater subsidies”.

The White Paper calls the unmetered or flat water supply charge, being adopted in Chennai, an “inherently unfair and regressive system”, which favours those living “in large houses and bungalows”.

A veteran economist says the White Paper has brought to the fore all the major problems. However, there is nothing new about the solution suggested, as the key lies in implementation. For example, Chennai Metrowater’s tariff for the domestic consumers has been designed to take care of metered supply too. But, owing to historical reasons, including the frequent droughts, the installation of meters has never been taken seriously.

Also, in respect of the public distribution system, the AIADMK government issued an order in July 2017, specifying guidelines for inclusion and exclusion of beneficiaries under the National Food Security Act, but it had no impact in view of the policy of universal PDS, the economist explains.

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