(My column published in MINT on Tuesday. This was my preferred header but MINT Edit page editors thought differently. I have fixed some minor errors in the version below. Unfortunately, they appear in the print version and they were my errors. Not that of the newspaper)
Ever since a Pakistan-backed terrorist killed Central Reserve Police Force jawans, scores of Indians have been making both strategic and tactical decisions on behalf of the government. Their lack of training, experience, and capability to make such decisions in real-time in a fast-moving world have, evidently, not deterred them. On issues that matter to them, such as electricity, water and taxes that they pay or don’t, they are oblivious of the challenges that their children and grandchildren would face. They will be doing the nation a service if they leave external power projection to the government and focus on the provision and pricing of electricity and water.
A land and environment court in New South Wales in Australia took into account the global budget for greenhouse gas and carbon emissions and rejected the appeal of a mining company to establish a coal mine. Coincidence or not, days after the judgement was delivered, separately, Glencore pledged to cap its coal production (Glencore Vows To Cap Global Coal Production, Financial Times, 20 February 2019).
With coal production getting limited because of environmental and business reasons, it will only get pricier. This is not good news for India. India’s power generation is largely coal dependent and will continue to be so for quite some time.
As Mridula Ramesh, director of the Sundaram Climate Institute and author of ‘The Climate Solution—India’s Climate Crisis And What We Can Do About it‘, points out eloquently and crisply in two of her recent articles for Firstpost, a considerable share of the bad debts in Indian banks is because of the problems faced by coal-based thermal power plants. Either the coal is not available or is available at a price much higher than they budgeted for, making it uneconomical to generate electricity at a price that they had committed to sell to their main buyers—the state electricity boards.
The buyers do not have the money to pay, despite the effort to clean up their balance sheets and make them financially viable. The financial viability of state electricity boards depends on the willingness of its end customers to pay for the electricity they consume.
As a growing developing economy, India has a need for power. However, the need translates into demand only when there is a willingness to pay, backed up by the ability to pay. That is missing. Free electricity to farmers results in another problem. It leads to indiscriminate exploitation of groundwater. It is considered politically suicidal to demand that consumers pay for it. However, Ramesh argues that it is not so. Madhya Pradesh showed that water could be charged and the government re-elected. In any case, her institute’s survey in and around Madurai found that many of the borewells, with diesel-powered generator sets, were usually owned by the larger, politically connected farmers.
In recent times, Indian governments have tried to use technology and biometric identification to ensure that subsidies are targeted or paid out as cash transfers. That has not extended to the targeted distribution of electricity and water to the poor at affordable rates, with the rest of the population paying economically remunerative prices. Ramesh’s answer to the problem of India’s electricity generation, which has to be dependent on coal for some time to come, is to price power and to vary the price on an hourly basis depending on the intensity of demand, like app-based taxi services do. A similar approach is needed for water. As she puts it, India’s climate sustainability and financial viability are intertwined. Are politicians ready to grasp the nettle?
When I saw that Feroze Varun Gandhi had recently come out with a book titled A Rural Manifesto: Realizing India’s Future Through Her Villages, it raised my hopes. While the book mostly conflated a wish list for policy proposals, it had its bright spots. The section on the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) made for interesting reading. It made an important point that the ministry of rural development stopped monitoring MGNREGA projects once they were completed. The nation may want to know whether the assets are maintained well, used and renewed. It is important in the context of the discussion in this column because the bulk of the assets created under MGNREGA pertains to water bodies. It is important that the rural communities that create these assets “own” these assets and also charge users for the water such that the water bodies could be maintained.
One idea that came to me after reading the book was that corporate social responsibility (CSR) funds should be applied to evaluating the effectiveness of government programmes and interventions, including subsidies, and then publicising them. That is one way to get the public to focus on issues they should care about and can do something about.
Ensuring adequate and safe water for all Indians is a war for which politicians may have to be prepared to lose a political battle or two from time to time so that the nexus of political connections and subsidies in the name of the poor is permanently broken.