In a recent interview given to a private channel, the prime minister, N Modi gave his full endorsement to the idea of holding elections to the Lok Sabha and all state assemblies simultaneously. However, he opined that the necessary initiative in this regard should come from the Election Commission [EC]. Meanwhile, EC has already submitted its views and a group of ministers [GOM] has been put on the job.
The founding fathers of the Constitution too had contemplated simultaneous elections and things were on right track till mid-60, when the apple-cart was disturbed due to ‘premature’ dissolution of some state assemblies [1968/1969] and Lok Sabha [1970]. Over time, the mis-match has only got aggravated with dissolution of many more assemblies. Now, elections in one state or the other are being held almost every year.
Apart from being a major distraction from governance and development & welfare activity, these frequent elections entail massive expenditure putting avoidable strain on the exchequer. But, the biggest drawback is that it is highly inimical to reforms which the country needs badly to accelerate growth, create jobs, increase people’s income and ameliorate poverty. What is the link between frequent elections and reforms? How does the former impede the latter?
During the last close to 5 decades of governance – be it at the center or states – successive political establishments have built a super-structure of freebies/largess es [a more sophisticated nomenclature for all these is ‘subsidies’] touching almost every conceivable area of human needs. The prominent among these are subsidies on fertilizers, food, kerosene, LPG, irrigation, power, credit, seeds etc.
When launched, these were justified in terms of helping the poor who with their meagre income could not afford these items. But, progressively their reach was extended to cover major proportion of the population. At present, all 140 million farm households [including the rich & very rich] are eligible for fertilizer subsidy at ‘uniform’ rate. 2/3rd of India’s population qualify for heavily subsidized food under the National Food Security Act [NFSA].
The subsidy on LPG until hitherto was being cornered by better-off sections of the society. Under the “Give Up” campaign flagged of by Modi, 10 million beneficiaries have surrendered. But, those availing of subsidy continues to be huge at around 145 million which includes a large number of better-offs [from January 1, 2016, persons earning more than Rs 1 million were asked to give up, but that is peanuts at just 2 million]. The kerosene subsidy is almost entirely galloped by dubious traders for mixing with diesel.
The subsidized credit though meant for poor farmers, is largely appropriated by better-off/rich farmers. There are instances of latter on-lending to former at much higher rates and making money on ‘arbitrage’. Likewise, subsidies on power have increased leaps and bounds and are also being appropriated by those who do not deserve. The story of subsidy on other items such as irrigation, seeds etc is no different.
The number of such subsidies and their ever expanding reach [embracing even non-poor] clearly shows that they have a lot to do with vote bank politics. By giving more subsidies, the incumbent governments enhance their chances of retaining power. On the hand, even a whisper of reducing these causes them jitters. And, since reforms inevitably involve subsidy reduction, no party wants to touch them even with a pole.
Take fertilizer subsidy. Way back in 1991, when economic reforms were initiated, then government had given a commitment to IMF/World Bank that this would be eliminated within 3 years i.e. by 1994. It is more than 20 years since then, and we still have fertilizer subsidy guzzling more than Rs 100,000 crores [likely actual for 2015-16 including arrears from previous years] of tax payers money.
Forget its elimination, during the last one-and-a-half decade or so, none of the ruling parties had the gumption to increase MRP [maximum retail price] of urea – most widely used nitrogenous fertilizer. There was an increase of mere 10% in 2010. Last year, Modi – government decided to freeze the price at existing level for 4 years. So, there won’t be any hike till 2019. That means more subsidy in years ahead.
In food, despite unabated increase in the cost of procurement and distribution, successive dispensations have only harped on reducing the price at which food is made available to beneficiaries. Thus, one shudders to fathom that under NFSA, a mammoth 800 million people are eligible to get food at throw-away rates of Rs 1/2/3 per kg for coarse grain, wheat and rice. No wonder, then annual budget of center alone for food subsidy is Rs 140,000 crores [2015-16]. This will only get bigger as more states come under the Act.
Likewise, in the power sector, no government has ever thought of reducing subsidies. In fact, states compete with each other in giving more and more subsidy. So, after Kejriwal who gives subsidized power for households [up to 400 units a month] in Delhi, now Jayalalithaa is giving it free [up to 100 units a month] to all households in Tamil Nadu. No wonder, state electricity boards [SEBs] have piled up a loss of more than Rs 400,000 crores now being given relief under the fanciful UDAY [Ujwal Discom Assurance Yojna].
During the last 2 years, Modi – government has unleashed a plethora of reforms in various sectors such as railways, defence, insurance, civil aviation, mines, roads, ports etc. It has brought about sweeping reforms in governance and made frontal attack on corruption. But, it has refrained from touching sensitive areas viz., fertilizers, food, kerosene, credit etc where massive subsidies are involved.
Normally, first half of any newly elected government is considered to be a ‘honeymoon’ period. During this period, it can afford to take some hard decisions which involve withdrawing avoidable subsidies as this is in the long-term interest of the economy. Yet, Modi could not do it despite BJP having an absolute majority in Lok Sabha. A paramount reason for this is elections in states every now and then.
If, he were to tinker with extant subsidy regime [say, by increasing urea MRP or increasing price of food under NFSA or reducing coverage or withdrawing subsidy on kerosene etc], this would severely impact the prospects of BJP in state elections in Uttar Pradesh, Punjab [2017]. And, since elections in other states are also lined up in following years, he will never be able to muster courage.
It could be argued that by doing good work and remaining focused on development also, it should be possible to win elections. But, there is a flaw in this argument. While, fruits of development work come with a time lag [these may not even be certain as outcome depends on several factors], the impact of withdrawing subsidy is immediate. Therefore, taking such a step will tantamount to political suicide.
In short, in a milieu where subsidies have taken deep roots and even the most genuine political dispensation runs a serious risk at the hustings, holding concurrent elections to Lok Sabha and all state assemblies will, without doubt, bring huge relief. This will ensure political stability and incumbent governments will be able to implement reforms without the fear of being punished in the short-term.
This will be a win-win for all especially the 1250 million people of India who need empowerment and means to be able to earn a decent living rather than perpetually living on doles. Hence, all political parties should build a consensus to make it happen sooner than later.