Election freebies

It is ironic that while an early election has been supported because it would prevent the government from coming out with a slew of populist schemes, what is now being planned is precisely this "" newspaper reports suggest the BJP is finalising a host of pre-election sops that are to be announced before the vote-on-account.

Clearly, the ingenuity of the country's political class is not to be underestimated. Its sense of even recent history, of course, is a different matter altogether, since our politicians clearly don't remember that while voters relish pre-election sops, they rarely allow these to influence their voting decision.

The recently concluded Assembly elections should have made this clear once again. The BJP performed miserably in Delhi despite promising all manner of goodies if they came to power, and the Congress was routed in Madhya Pradesh despite Digvijay Singh going out of his way to woo Dalits and members of other lower castes by issuing them land and other forms of greater empowerment.

Of course, the goodies being planned by the BJP at the Centre pale in comparison with the fare being offered by Andhra Chief Minister Chandrababu Naidu. If implemented in the spirit promised, Mr Naidu could deal another body blow to Andhra Pradesh's fiscal situation, of the kind dealt by his late father-in-law's Rs 2 per kg subsidised rice scheme.

The state has already declared a 5 per cent interest subsidy on cooperative loans to farmers for the year 2003-04, an extra 90,000 houses for the poor (in addition to the 7 lakh houses proposed for the current year), and so on.

The piece de resistance, of course, is the constitution of a new pay revision commission for the 9 lakh-strong state government employees. The last time salaries were revised, as a result of the Fifth Pay Commission, the state's wage bill went up by around a fourth to Rs 8,000 crore.

On the face of it, the sops being considered by the Centre may look sensible. Lowering interest rates for cash-strapped small-scale units, for instance, is certainly desirable. Yet, the reason why banks don't lend to SSI units today is precisely this "" that the interest chargeable from them is too low to justify the perceived risk of lending to them, especially when risk-less government paper offers much higher returns.

In fact, even banks such as the Grameen Bank of Bangladesh, seen as champions of the poor, charge much higher interest rates, around 16 per cent today. So, if the BJP genuinely wants to see more credit to SSI units, it has to allow banks to charge higher rates, not lower ones. The latter makes for great political speeches, but little else.

Hiking procurement prices, similarly, is great for speeches, but since procurement really takes place in just 3-4 states, how do farmers really benefit? Higher fertiliser subsidies, another option politicians love, especially those on items like urea, really go to fertiliser units.

What farmers need, actually, is genuine deregulation that allows them to sell their produce to anyone, even in other states. Today, however, farmers can't even sell to wholesalers at their farms (they have to take their produce only to over-crowded mandis), and states like Andhra Pradesh, apart from banning inter-state movement, impose a 1 per cent market fee, a 4 per cent sales tax and 5 per cent rural development cess on paddy. While the electorate will see through the farcical sops, the country's treasury will be that much worse off.