Opinion Not so aam aadmi policy

One clue to their philosophy was recently provided by their ideologue czar,Yogendra Yadav. He admitted to the fact that the philosophy of the AAP was socialist,though he added and hoped that its policies would not be silly. Both the socialist and silly components of the AAP’s policies are examined through the prism of its well-articulated and developed policy on water distribution.

Most conventional beliefs about socialism centre on the ideology,and hopefully practice,of helping the poor and the disadvantaged. What differentiates true socialists from populists is the practice of populism. We can forget about non-socialists because without the need for evidence we know that they are rapacious and guilty of every exploitative crime. The real question is whether the new socialists buck the trend of others who have also campaigned in the name of the poor — and grotesquely failed to deliver. The AAP,and its leadership,is acutely aware of this phenomenon because their campaign,for two years,has been against the Congress party,an in-the-name-of-the-poor political organisation bereft of any ideology except the exercise of power and,at least according to the AAP and many others,the fulsome exercise of corruption. One of the supreme ironies of the ascendancy to power of the AAP is that its major ally in the governance of Delhi is none other than the Congress.

The thinking water policy of the AAP is as follows: “within 24 hours” of coming to power,the AAP will provide 700 litres of water per day for free to every household. However,any household using even an extra drop of water more than the stipulated 700-litre average would pay for all the water consumption.

Some idea of the thinking behind this extraordinarily innovative water policy is obtained from an April 2013 AAP document. This document notes that the profit of the Delhi Jal Board in 2012-13 was Rs 466 crore,“and this is where the cost of providing free water would come from”. One interpretation of their policy is that since profits are obtained from the sale of a public good such as water,such profits should be returned to the people. This would be a sensible policy if all public sector efforts — health and education,for example — were also free. An idea sirji,but the thought remains — where is the money for all this socialism?

In my previous article,‘AAP ki Tea Party’ (IE,December 21),I had suggested that the AAP was really the Tea Party of the left,that is,it seemed to have borrowed its tactics and non-economic beliefs from the ultra-conservative Tea Party in the US. But I must admit that my thinking,and research,has been severely challenged by the AAP water policy.

Parallels with income taxation come to mind. There is a threshold I have to cross before the tax rate kicks in. For example,for the first Rs 2 lakh that I earn,I pay zero income tax,and for the next Rs 3 lakh,I pay a tax rate of 10 per cent. So,if I earn double the threshold level — that is,Rs 4 lakh — my tax liability would be Rs 20,000,and my average tax rate would be 5 per cent. Contrast this with the AAP water proposal. For the first 700 litres a day or 21 kilolitres (kl) per month,I pay zero “tax”,and for the 21.00001 kl onwards,I pay for all the 21 kl consumed,that is,Rs 260 (based on slabs of rates and fixed charges).

How realistic and constraining is the water threshold of 21 kl per month? Not constraining at all. According to most estimates,the “normal” per capita consumption of water is around 150 litres per person per day (lpppd). Assuming an average Delhi family size of four (NSSO data),the AAP largesse of 700 litres per household translates to 175 lpppd. This level is well above that prevailing in Western countries like Germany and Denmark.

The mystery remains — where did the AAP get the idea of free water from? According to Yogendra Yadav,the economic policies of the AAP (water,electricity,etc) were formulated after considerable thinking on the part of the AAP’s team of advisers and economists,no doubt buttressed by feedback from the large number of mohalla meetings.

Extensive perusal of the literature does yield an example of a “similar” water policy. More than a decade ago,in 2000,the then president of South Africa (SA),Thabo Mbeki,outlined the following water policy: All poor South Africans should receive a minimum amount of water for free,and that amount was stipulated to be 6 kl per month. After this consumption,for each additional litre,the household would be charged for the entire consumption.

The AAP policy is virtually identical,but with important differences that make the comparison with the SA proposal akin to comparing chalk and cheese. First,the SA free amount was based on an average household size of 8 persons,or only 25 lpppd,or one-sixth the AAP level for the upper middle class. Since most requirements of minimum water are above 100 lpppd,the SA policy meant no change in the revenue of the water authorities. Second,the SA policy allowed each municipality to freely interpret and implement the recommendation,that is,it could charge the residents only for the extra water consumed,or for all the water consumption. It appears that no municipality has followed the infinite tax policy since statistics show that “75 percent of all free water in South Africa is delivered to people who can actually afford to pay for it”.

It also appears that the AAP has gone back thousands of years to the Mahabharat for insights into 21st century policymaking. Recall that in the Mahabharat,Shishupal’s mother was given a vow by Krishna,her nephew,that he would pardon his cousin Shishupal a hundred times for his misdeeds. On one fateful day,Shishupal started abusing Krishna in the court,which was filled with all the dignitaries of that era. Lord Krishna kept smiling and dissuaded Shishupal from crossing the 100 mark. However,he chose to ignore and on the 101st mistake,was killed by Krishna’s Sudarshan Chakra.

There is a more enlightened policy that the AAP could chose to implement,if it were not besotted by its own image and political success. The first goal of any subsidy has to be the upliftment of the poor. Water delivery allows policymakers near perfect,actually perfect,targeting. Kejriwal and Yadav can know with precision who has a water connection and who does not. About 20 per cent of Delhi households,around 7 lakh,do not have any piped water connection. The top 60 per cent of households should pay a higher rate of the water consumed in order to finance the water consumption of the bottom 40 per cent. Unfortunately for the Delhi poor and disadvantaged,the recommended capitalist policy will not be followed by the AAP because it is not in the name of the poor,and definitely not socialist.

The writer is chairman of Oxus Investments,an emerging market advisory firm,and a senior advisor to Zyfin,a leading financial information company

express@expressindia.com