Column: Kejriwals waterfront

Jan 04 2014, 05:18 IST
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SummaryKejriwals water subsidy for Delhi is reverse Robin Hoodtaking from the poor and giving to the rich

By announcing its two ostensibly pro-poor, pro-aam-aadmi policies concerning water and electricity, the AAP has made clear its economic vision for the country. Note that I am not crediting the AAP with its vision of a corruption-free economy and polity. That is a goal of everybody, including mothers for motherhood, and any significant reduction of corruption will be a major contribution to Indian democracy and its economy.

It is well known, including by policymakers within the AAP, that discretion in decision-making increases corruption. As do distortions in the pricing mechanism (as shown in the accompanying table). For example, if the government prices kerosene substantially below diesel, then the policy encourages corruption by making it profitable to mix kerosene with diesel.

One of the most intriguing features of the AAPs policy on water (and electricity) is their pro-rich stance. How did this happen? As the table shows, the water policy goes significantly against the poor and the lower middle class. One of the most stylised facts about development, incomes and poverty is that larger-family households are poorer. As the table shows, households with a family size greater than or equal to 5 members have average expenditure levels (NSSO 2011-12 data for Delhi households) only twice the poverty line. These households will pay for all the water consumed because their usage is higher on a per household basis. In contrast, those who need water less and can afford to pay more (with per capita expenditures almost four times the poverty line), will receive water free. The poor will pay R663 crore to the AAPs water board; the rich will receive R333 crore from the AAP as subsidy. What Kejriwal and the AAPs water policy illustrates is a perfect inversion of Robin Hoodsomething corrupt, in-the-name-of-the-poor Indian governments have attempted but not succeeded at so perfectly. I challenge anyone to imagine, let alone formulate, a more anti-poor and more anti-lower middle class policy. Phrased differently, can anyone formulate a more pro-rich policy?

Some hints about the Kejriwal water policy can be obtained from his 2005 agitation. At that time, as many of us recall, Delhi was facing a serious water crisis caused by inefficient water management. One pilot recommendation was to privatise water management in two central areas of Delhi, representing only 12% of the customer base. The management would not have any authority to set tariffs or policyjust management. It was also viewed anxiously by the

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