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Free electricity schemes can lead you to debt: Union Minister RK Singh warns states

Union Energy Minister RK Singh cautions states on providing free electricity due to debt concerns, highlighting Punjab's reliance on loans for such schemes. He urges fiscal responsibility, warning against exacerbating debt through populist measures. Singh's remarks underscore broader debates on the sustainability of welfare programs in state economies.

Free electricity schemes can lead you to debt: Union Minister RK Singh warns states vkp
First Published Apr 8, 2024, 9:49 AM IST

Union Energy Minister RK Singh issued a stern warning to states indulging in the practice of providing free electricity to citizens, citing concerns over escalating debt. Singh highlighted the case of Punjab, which procures electricity through loans to distribute it at no cost to the populace. He emphasized that while such schemes may be popular, they come with a hefty financial burden that could push states further into indebtedness.

Singh's remarks underscored a growing apprehension within the central government regarding the fiscal responsibility of states, particularly those offering electricity subsidies funded by borrowing. The focus of Singh's cautionary message was on states like Punjab and indirectly referenced Karnataka, both known for their initiatives to provide free electricity to residents.

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"Electricity, like any other commodity, comes at a cost. If states choose to provide it for free, they must ensure they possess the necessary financial resources to cover the expenses," Singh stated. He stressed that relying on loans to finance such schemes could have dire consequences, exacerbating existing debt burdens and potentially trapping states in a cycle of financial instability.

Singh lamented the trend of states accumulating debt to finance populist measures, cautioning against the detrimental effects of such practices on the overall financial health of the state. "Many state governments are plunging deeper into debt by offering freebies," he remarked, urging policymakers to exercise prudence in their fiscal decisions.

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The minister's remarks come amidst a broader debate on the sustainability of welfare programs and subsidies in India's state economies. While these initiatives aim to alleviate the financial burden on citizens, concerns have been raised about their long-term viability and impact on state finances.

Punjab, in particular, which has been grappling with mounting debt, worsened by the cost of providing free electricity and other subsidies. Singh's warning serves as a timely reminder for state governments to reassess their fiscal priorities and adopt measures to mitigate the risk of excessive borrowing.

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