Poor outcomes of infra subsidies

One of the paradoxes of India is that the massive infrastructure subsidies that the central and state governments sustain in the name of helping the poor have brought limited benefits to these target beneficiaries but play a key role in stalling the ambition to attain "Viksit Bharat", whichever way you choose to define it.

- KANIKA DATTA

Unless these subsidies are reassessed, India's yearning to become a manufacturing powerhouse will be as elusive as ever — a reality that ends up doing a disservice to the poor. This is not to argue against subsidies for the poor and genuinely needy. But India is supposedly an information technology powerhouse, and solutions are available in the form of well-designed direct benefit transfers to the genuinely needy.

Let's start with power. In the first flush of reform in the 1990s, with a view to attracting private sector investment in this near moribund sector, states started unbundling their electricity boards into generation and transmission and distribution companies, and introduced the concept of power purchase agreements (PPAs). Steady regulatory reform over the decade attracted a raft of efficient private power producers; today, private power generation accounts for almost half the installed capacity.