Delhi, Bihar Assembly elections in 2025 to test the fate of freebies

This year will have the fewest elections of any in the current five-year electoral cycle. What does that mean for welfare schemes?

A feature of the flurry of elections in 2024, which included Lok Sabha elections and eight Assembly polls, was the slew of welfare schemes, including cash transfers for women that political parties of all ideological and spatial hues proposed. With only two Assembly polls, namely, to elect governments in Delhi and Bihar, 2025 will have the least number of elections for any year of the current five-year electoral cycle.

 

There are already indications that the pause has given at least some state governments much needed room for manoeuvre to cut down on some of the subsidies, such as free power. They have taken to defend their decisions by pointing out that their governments were continuing with the cash transfers and free bus travel for women.

 

The run up to the forthcoming Assembly polls in Delhi, slated to be held by mid-February, may have triggered another round of promises of welfare schemes, such as a Rs 18,000 monthly allowance for priests and Rs 2,100 monthly cash transfers for women. But the first week of the New Year indicates that some of the state governments, burdened by the pressure on their finances because of cash transfers and other similar promises, believe it is time to restrain in disbursing freebies. In the last few weeks, Himachal Pradesh and Madhya Pradesh have moved to reduce power subsidies, while Karnataka has increased the fares of state transport buses.

 

Electricity in Himachal

 

On January 1, Himachal Pradesh Chief Minister (CM) Sukhvinder Singh Sukhu relinquished the subsidy on all five power connections registered in his name. He urged the state’s well-off residents, particularly those with multiple electricity connections, since they receive the 125 units of free electricity subsidy on each of these meters, to follow his lead.

 

Himachal is under a massive debt of  Rs 86,589 crore. In 2024, the state government delayed payment of salaries to govern­ment employees. Some of its welfare schemes have added to pressure on the state’s resources. A year back, the Himachal government had rolled out its Indira Gandhi Pyari Sukh Samman Nidhi Yojana which provides for a monthly allowance of Rs 1,500 to eligible women above 18.

 

Addressing a press conference in Shimla last week, the CM said all ministers and legislators had agreed to forgo their subsidies. Himachal spends Rs 2,200 crore on electricity subsidies and Rs 200 crore per month, which works out to be Rs 2,400 crore annually, on salaries and pensions of electricity board employees.

 

A couple of days later, the Himachal Pradesh State Electricity Board Limited said the subsidy of up to 125 units of free electricity to domestic consu­mers will not be available for sections of government employees and pensioners from January 1. The government hopes to save Rs 750 crore with the measure.

 

Leader of the Opposition in the state, former CM Jai Ram Thakur accused the Congress government of betraying the people of the state by not only failing to deliver on its poll ‘guarantee’, made in December 2022, of 300 units of free electricity, but snatching away the 125 units of free electricity that the previous Bharatiya Janata Party (BJP) government provided.

 

Bus fares in Karnataka

 

Down south, in Karnataka, the state Cabinet’s first meeting in the New Year, on January 2, approved a 15 per cent hike in fares of the buses that the state road transport corporation plies. Since the Congress government delivered on its poll promise in May 2023, the Shakti Yojana, which made travel in state transport run buses free for women, the hike will impact male passengers.

 

The government said it will save Rs 784 crore annually after the hike. It also said that the fares were last increased in January 2015, and were, even after the hike, comparable to those in Maharashtra, Andhra Pradesh, and Telangana.

 

Opposition BJP leaders protested the decision by offering roses to male passengers of the state transport buses and “apologising on behalf of CM Siddaramaiah”.

 

Transport Minister Ramalinga Reddy shot back, saying the women of Karnataka would not vote for the BJP. The Siddarama­iah government has said it is committed to continue its ‘Gruha Lakshmi’ scheme, under which eligible women get Rs 2,000 monthly allowance. However, budgetary allocations for some other welfare schemes, such as for people with disabilities, have been slashed significantly.

 

But it isn’t just the Congress governments of Karnataka and Himachal Pradesh taking remedial measures to make their finances healthier. The BJP’s Madhya Pradesh government is ploughing a similar furrow.

 

Non-essential expenditure in Madhya Pradesh

 

In a recent interview to Business Standard, Madhya Pradesh CM Mohan Yadav said his governm­ent’s focus in the last one year had been to reduce “non-essential expenditure”, particularly in the power sector.

 

“MP provides an annual subsidy of Rs 15,000 crore to farmers, which accounts for 93 per cent of their total power consumption. This subsidy burden would have continued to increase if we hadn’t intervened. Our aim is to cut it down to zero within three years by offering financial assistance to farmers to install solar pumps,” Yadav said.

 

The state government’s strategy has been two-pronged, addressing both urban consum­ers and farmers. “Together, these groups account for roughly Rs 25,000-26,000 crore in annual power subsidies from the state government which we want to end,” he said.

 

Yadav said his government had conducted an assessment of each state government department and identified the losses they incurred — for instance, the Rs 25,000 crore power subsidy. “There has been no opposition to reducing this, especially when we are disburs­ing funds under the Ladli Behna Yojana. From January 2024 until now, we have distributed Rs 19,000 crore to 12.9 million beneficiaries through this scheme,” he said. 

 

Loss of confidence?

 

According to SBI Research, the total cost of the direct cash transfers to women in eight states is Rs 2.11 trillion. It analysed the data for Maharashtra, Delhi, Odisha, Chhattisgarh, Madhya Pradesh, Karnataka, Gujarat, and West Bengal. But since the data did not factor in the expenditure on similar schemes that Assam, Andhra Pradesh, Telangana, Tamil Nadu, Himachal Pradesh and Jharkhand run, the total cost is likely to be almost twice as much.

 

In some cases, such as Karnataka, the Rs 28,608 crore annual allocation for the scheme is as steep as 11 per cent of the state’s revenue receipts. It is 7 per cent for Madhya Pradesh, and will increase significantly from the current 9 per cent for Maharashtra if and when the Devendra Fadnavis government fulfils its poll promise of hiking the monthly allowance under the Majhi Ladki Bahin Yojana from Rs 1,500 to Rs 2,100. Punjab’s AAP government promised a cash transfer for women, but the state’s mounting debt has deterred it to implement it.

 

Economist Arun Kumar, who retired from New Delhi’s Jawaharlal Nehru University, says the so-called freebies are a result of a loss of confidence among the electorate in political parties as they have failed to ensure basic services to them. “So, political parties, in an effort to influence the hearts and minds of the electorate, especially in runup to elections, indulge in such quick fixes, including promising free power supply, free bus travel, and cash transfers for women. The damage that it is doing will be long-term,” he says.