Freebies: The truth is somewhere between evil and necessity

Call it by any name, freebies are now an integral part of Indian politics. Many term this phenomenon as 'empowerment' of the underprivileged, while others see it as a bribe to the voters.

This column, 'In Black & White', may not live up to its name while deliberating on the vexed issue of freebies ‒ a matter pending before the Supreme Court of India ‒ and over which ruling BJP and opposition parties are involved in a slugfest. It's almost impossible to take a stand, either way, without sounding unfair or preferential.

Prime Minister Narendra Modi on Wednesday last, (August 10) said, "Anyone can come and announce to give free petrol and diesel. Such steps will take away the rights of our children, and prevent the country from becoming self-reliant. Due to such selfish policies, the burden on honest taxpayers of the country will also increase." Those following developments leading to collapse of Sri Lankan economy, and Pakistan sinking into a financial quagmire, would surely resound with Modi on the subject.

Call it by any name ‒ subsidies, freebies or revadis ‒ freebies are, however, now an integral part of Indian politics. Many term this phenomenon as an 'empowerment' of the underprivileged, while others see it as a bribe to voters, a millstone around country's neck or an unfair penalty imposed on the honest taxpayers.

The truth obviously is somewhere in between. An economic system, based on competition, and markets can give a fillip to GDP growth, push stock market graph spiralling but cannot bring about social justice or ensure a fair distribution of incomes.

In modern times, no political system can survive for long, without empathising with the weak, and taking some affirmative action in their favour. Crudely put, the system has to find a legitimate way to rob Peter to pay Paul. The ruling establishment has to take a call ‒ who to tax, and who to help. Good and practical politics is an ideal mix of both ‒ taxes and subsidies ‒ and a political party's capacity to successfully market it to the electorate.

An enlightened leadership knows that a buoyant economy is necessary to fill state coffers through taxes, which in turn can fund freebies. So it's careful, not to kill the goose that lays the golden egg ‒ and avoids going overboard while doling freebies in pursuit of votes. The time tested adage: cut your coat according to your cloth, is as much relevant to nations as to ordinary households.

The contentious issue of freebies has now landed in Supreme Court. While dealing with a PIL filed by Ashwini Upadhyay relating to freebies, a three-judge bench led by CJI N V Ramana on August 3 had said, "We are of the considered view that it would be appropriate to constitute an expert body with representatives of all stakeholders: the beneficiaries, those opposing freebies, central government, state governments, opposition parties, finance commission, RBI, Niti Aayog, etc, to take a holistic and comprehensive view of the matter and making their recommendations."

During the last Thursday's hearing, CJI Ramana put the entire issue succinctly when he said, "The economy losing money or getting ruined is one issue and, at the same time, welfare measures for the poor... both have to be considered. Both have to be balanced." The SC has posted the matter for further hearing for Wednesday (August 17.)

However, the Supreme Court had a different view on this issue earlier. As the Election Commission of India has pointed out that it was the SC in its 2013 judgement which had held that promises made by political parties and candidates in their manifestos could neither be construed as a corrupt practice under Representation of the People Act nor violation of a level playing field (Article 14).

The Election Commission also said that in the 2013 verdict (S Subramaniam Balaji vs Tamil Nadu), "the SC had declined to interfere in the schemes under which goods such as gold, TVs, laptops, mixer-grinders, electric fans,... and that whether incurring expenditure on the same and to what extent was not to be determined by the court but to be decided and debated in the legislature."

Indirectly hitting out at the "free electricity" poll promise, Solicitor General Tushar Mehta told the apex Court, "Please look at certain stressed sectors. Many electricity generating companies and distribution companies, most of which are government companies, are severely stressed financially. Till the legislature steps in, the SC should lay down guidelines... Welfare scheme every responsible government must understand, but distribution everything free and taking to the level of an art, is not welfare."

What the SG has told Supreme Court is substantiated by facts. States have unpaid power dues of nearly Rs. 1.4 lakh crore. Electricity distribution companies owe over Rs. 1.1 lakh crore to generation companies. A recent RBI report says a bailout for 18 large states, would cost them around Rs 4.3 lakh crore. The situation is really bad in case of Rajasthan, Tamil Nadu and Madhya Pradesh.

Experts differentiate between non-merit subsidies and merit subsidies. The government must spend on police-judicial system to ensure effective law & order, safety for common citizens, dispensation of quick justice and compliance and enforcement of mutually agreed contracts. Investment in infrastructure- roads, waterways, railways, airports is welcome.

Availability of quality education at reasonable prices can go a long way in bridging the gap between the rich and the poor. Gifting sewing machines for men/women to start stitching units, tablets to school/ college students or cycles to deserving students for commuting to their institutions, will be considered as merit subsidies.

The state funding for meeting the religious urge like travel abroad for Haj by Muslims, or by Hindus, Sikhs or Christians to various pilgrimage centres within India, financing of madrasas and sponsoring of weddings, gifting consumer durables such as TV sets, mixers, computers at random to citizens ‒ all constitute non-merit freebies. Free power to farmers has created a lot of distortions in the economy and played havoc with environment. It has promoted wasteful pumping, with disastrous consequences for the water table in many states.

The pro-freebies lobby is led by AAP supremo Arvind Kejriwal who terms those opposing freebies as 'traitors'. While using such invective, Kejriwal conveniently forgets that there is nothing 'free' in this world. Everything has to be paid for. If A is getting a facility or a service free, someone else is surely paying for it. The same applies to freebies or subsidies ‒ the state or the society pays for them. Where does the state gets its resources ‒ through taxes or borrowings. And borrowings mean using future income today or the present generation passing on its burden to the following one.

The absurdity of Kejriwal's argument is obvious. While he is advocating for a no-holds barred freebies regime, the AAP-ruled Punjab is pitching for a Rs One lakh crore special package from the Centre to meet its mounting subsidies bill. The Punjab CM Bhagwant Mann, has announced several sops, including free 300 units of power to every house hold every month.The state already has a debt of over Rs 3 lakh crore.

But can we do without subsidies? No we can't, for there is not one India , but many stacked side by side, and gap in their consumption and income levels, is enormous.

At the bottom are some 150 million Indians, who may have managed to crawl above the poverty line, but still need help for essentials ‒ nutritious food, elementary education and basic health facilities. India cannot achieve its potential, without improving the lot of those at the bottom.

Freebies or doles, however, have a limited role. An old adage recommends, "teach them how to catch fish" rather than giving the fish. There's a lot of wisdom in this saying.

(Mr. Balbir Punj is a Former Member of Parliament and a Columnist. He can be reached at: [email protected])

Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of OneIndia and OneIndia does not assume any responsibility or liability for the same.