Aping AAP: Maharashtra's me-too act on power spells trouble for economy

Somebody needs to tell political parties that one size doesn’t fit all. Otherwise, they may just start imitating what they think is the Aam Admi Party’s success mantra in Delhi and mess up everything in an election year.

An indication of this is the Maharashtra government’s decision to set up a committee headed by industry minister Narayan Rane to look into the possibility of cutting power tariff in Mumbai (read the Business Standard report here ). He, however, has categorically said that it has nothing to do with the AAP coming to power in Delhi.

The reason for the move is a letter from Congress MP Sanjay Nirupam urging the government to cut charges for the consumers using less than 500 units a month in Mumbai. He wants the government take this measure before the Lok Sabha elections.

According to former Central Electricity Regulatory Commission Chairman Pramod Deo quoted in the report, the government can make the power charges uniform by subsidising a category of costumers, but the distribution company will have to be compensated for the cut they take.

Deo doubts whether such a plan will be viable in Mumbai. For one, electricity in the city is distributed by three companies and they charge different rates for same category of consumers because their sources are different.

A report in The Times of India says that if the state government indeed decides to go ahead with the AAP-style tariff cut, it would cost Rs 1,600 crore. The AAP in Delhi has a cut off of 400 units per month for cheaper power. Meanwhile, Nirupam wants the cutoff at 500 units. So the cost of the subsidy will be further higher by a few hundred crores.

Add to this the other subsidies the state government gives - Rs 3,000 crore for pump sets and Rs 500 crore for power looms (BS report). The planned cross-subsidy will increase the burden by a thousand crore.

That the subsidy will further endanger the fiscal situation of the government is a no brainer.

Experts are already crying fowl of the AAP’s move in Delhi. As an editorial in the Business Standard notes, announcing the subsidy without waiting for discoms’ audit means the party is not taking the audit seriously. If the audit finds that the contrary to AAP’s allegations, the companies had not inflated the bills, would the party have the political will to roll back these tariff, asks the edit.

Another problem with the AAP is that its economic policies are turning out to confrontational. A report in The Financial Express says the Tata and Anil Ambani companies have stepped up their battle opposing the CAG audit of their books. They have written letters to the additional secretary questioning the need for a CAG audit, the report says.

All in all, the AAP’s economic and business policies are not going down well with the companies concerned. If other political parties start aping them to taste the little blood of electoral success, policy paralysis will be back to haunt the economy.

(Editor’s note: An error about likely subsidy burden for Maharashtra has been corrected in the sixth paragraph in response to a reader’s comment.)