Monday, March 30, 2015

DBT : Opting out

The Prime minister made a request to the people of India that anyone who can afford to buy the LPG gas cylinder without subsidy should opt out of the direct benefit transfer (DBT) scheme. This will reduce the subsidy burden of the government marginally, he said. The austerity has hit the DBT scheme, and what makes it more interesting is, it came out of the PM’s speech, who was recently not-so-austere on his dresses for special occasions. Let’s take a look at this request in reality.

It is true that few thousand citizens opted out of the subsidies and registered themselves to pay in full for their LPG cylinders. This action is definitely out-standing. But I am not sure, if it is an intelligent economic decision both in the eyes of the “out-standing” consumer and the exchequer.

In poor and developing nations, you always see this “save this/that” or “conserver this/that” movements. With water, electricity, trees, environment, forests, etc. There is always a feeling that something is not right like before and we could make a little adjustments here & there, and that would “fix” the problem and it’s all great from there. For years and years, we in India have seen this “save water” advertisements initially in radios, then on televisions and in the print media. It instructs the individuals to save water usage at home. It asks me not to take a bath in two buckets but to wash myself in a single bucket. The problem with this argument is that – not everyone is on board. The extra bucket I didn’t consume is used by the neighbor next door. On top of that – I do not like him to start with. So what is my incentive to consume less for which I know – will only be used or wasted by someone else. There is absolutely no incentive. Moral comfort – It’s just an excuse. In real-time, it just a strategy that doesn’t work. It never works with human nature at play. The whole thing is a mockery. We should also note that, when these advertisements where played again and again, the water usage by the rich and powerful has only increased and the ordinary people have little water now than say a decade before. In the meanwhile there were no new measures that increased the amount of water for the population. In other words, the government wants its citizens to under-consume the water, but it hasn’t tried to solve the problem at its end. How many liters of water reaches your home every day? How much has it fallen over the years? It is not because we used so much water every single day, but the government has not been able to marshal its resources to provide sufficient portable water to its people. Even partial linking of rivers has not been initiated. Successive governments have sat on it and have provided only lip service during elections.
On the other hand, In developed world, you do not hear these empty rhetoric. Things are planned more efficiently and delivered, mostly by a private player with a intention to profit. There is abundant water for households. There are some studies that say, the amount of water flushed out in American restrooms, is more than the amount of water used by few households in India. It is not a arrogant behavior. It is all about doing what is necessary. The system has been set-up and is maintained that works. This has ensured, that people are not starved of their essentials. Moreover doing it in a better way has ensured, there is minimum wastage. It is a common in the street of our country, where drinking water goes out into the road because a water pipe is broken and it would take days and weeks to fix it. Emphasis is the delivery model - the way water is procured and delivered. They have evolved over time to be better and better. What we need to do in our country is to replicate those ideas and allocate resources. We are not the only country in the world - that uses water!

The giving up of LPG subsidy is just like the “save water” hypocrisy. Why should someone forgo, the subsidy they “deserve”? If you give it to the other guy, why can’t you give it to me? If you are not giving me that money, what happens to that money? I am positive it will be squandered on something else. Frankly, for a family of 4-5 people, the number of LPG cylinders needed would be 6 to 8 per year. But the governments maintains it at 12 per year as part of its vote bank politics. Instead of dealing with those issues, the government is trying to create sympathy and is begging the normal guy to pay for it and share the burden. The ultimate “fix” to this problem is to get rid of subsidies. The market will determine the price.
In fact, the government is in the midst of the LPG cylinder business and the whole thing is messed up.


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