How the Samajwadi freebies bill adds up

Rough calculations show the freebies will involve a recurring expenditure of about Rs 11,000 crore annually,besides a one-time expenditure of another Rs 11,000 crore. In 2010-11,the state had a revenue surplus of only Rs 566 crore.

“The promises are neither practical nor financially feasible,” said Prof Yashvir Tyagi,professor of economics at Lucknow University. “Rather than announcing freebies,the government needs to make investments to strengthen the economy.”

According to A K Singh,economist and director of the Giri Institute of Social Development,“the promises will mean an expenditure of thousands of crore of rupees. Uttar Pradesh has maintained fiscal stability over the last five or six years and is now revenue-surplus. These schemes will push the economy into deficit unless revenue is found for them”.

An assessment of the financial impact of the SP’s election promises:

Rs 6,000 cr/yr
Support price

A proposed committee will work out the costs of production of crops and submit a report in three months; the government will fix a support price 50 per cent higher. The MSP is decided by the Centre according to the recommendations of the Commission for Agriculture Costs and Prices; states often fix a support price a little higher. The problem is that the states inflate the cost of production in order to get a higher price for farmers. For example,UP’s agriculture department,in its recommendation to the CACP for the MSP of wheat,had suggested Rs 1,800 per quintal for the coming harvest,and claimed it was 15 per cent higher than the cost of production. But the Centre fixed the price at Rs 1,285.

Going by the state’s calculations,a 50 per cent addition to the cost will push up wheat’s MSP to over Rs 2,200,which means the government will have to bear an extra Rs 1,000 per quintal. In 2011-12,the state has a target of procuring 39 lakh tonnes of wheat and 23 lakh tonnes of paddy. Experts say this would mean an extra expenditure of Rs 6,000 crore a year just for the procurement of these crops.

Rs 11,000 cr
Loan waiver

Mulayam Singh Yadav has promised a waiver on all farmers’ loans up to Rs 50,000,though the manifesto is silent on this. Sources in the State Level Bankers’ Committee said the total outstanding agricultural loan till December 2011 was Rs 57,700 crore. This constitutes 31.04 per cent of the state’s total outstanding,much above the RBI benchmark of 18 per cent for agricultural loans. When waiving a loan,the usual practice is to write off what is overdue,generally 40-50 per cent of the total. Keeping calculations to the lower side,the overdue would be about Rs 23,000 crore. Even if half these loans are below Rs 50,000 (although 90 per cent of UP farmers are small and marginal farmers),the amount to be waived will be more than Rs 11,000 crore.

Rs 1,532 cr/yr+
Free electricity

Promised for farmers and weavers. Electricity supply to the farm sector is heavily subsidised. The UP Power Corporation Ltd’s revenue from the agriculture sector in 2009-10 was Rs 1,532.14 crore. “Free electricity to farmers means a direct loss of Rs 1,532 crore,” said Shailendra Dubey,secretary general,All India Power Engineers Federation. The annual burden of subsidy on the supply to the rural sector is Rs 4,500 crore,Dubey said,adding,“With such populist measures,the power sector is bound to deteriorate. It has happened in states like Tamil Nadu and Andhra Pradesh.”

From small and medium powerlooms,the UPPCL got an estimated Rs 118 crore in 2009-10. Already,powerlooms are charged at a highly subsidised flat rate,irrespective of usage. This was introduced by the Mulayam regime in 2006,a source said.

Rs 589 cr/yr
Free irrigation water

Over 77 per cent of the irrigation water in UP comes from private tubewells. For the remaining 23 per cent,the main sources are canals (major irrigation) and government tubewells (medium irrigation). According to RBI data,UP’s revenue in 2010-11 was Rs 558.20 crore from major and medium irrigation and Rs 31.25 crore from minor irrigation; free water would mean a loss of Rs 589.45 crores. The state’s expenditure on irrigation is already Rs 2,759.91 crore (major and medium) and Rs 871.63 crore (minor).

“The issue at hand is not free supply of electricity or water. People are ready to pay if the government ensures proper supply of water and electricity. Under the present conditions,canals for irrigation are mostly dry and most of the government tubewells don’t work. The erratic supply of electricity does no good to the farmers,” said Prof Tyagi of Lucknow University.

Rs 1,819 cr/yr
Laptops/tablets

The Samajwadi Party has promised free laptops and tablets to Intermediate- and matriculation-pass students respectively. Sources in the party say these will be pre-designed with course material for ready reference. According to figures with the Secondary Education Board,22.93 lakh students matriculated and 15.90 lakh passed Intermediate in 2011. Taking the cost of a laptop at Rs 10,000 and a tablet at Rs 1,000,the total annual cost would be at least Rs 1,819 crore.

“It is a good idea to give laptops or tablets because it will prove a powerful instrument of social and economic change for the youth. Around Rs 2,000 crore is not a very big amount for any government,even if it is a recurring expenditure,” said economist Singh of Giri Institute. “But what will students in rural areas do with the kind of electricity supply that villages get?”

Rs 1,000 cr/yr
Unemployment allowance

The party has promised to raise the eligibility age for government employment to 35; those who fail to get a job by that age will be given an unemployment allowance of Rs 1,000 per month. In 2006,Mulayam had announced a similar scheme,but the amount was Rs 500 per month for graduates aged between 25 and 35. The estimated annual expenditure then was Rs 500 crore. No data is available on unemployed people aged over 35,but even if one assumes that roughly the same number of people (a conservative guess,given that no upper age limit has been set yet) would be paid the doubled allowance,the bill would be Rs 1,000 crore.

Beyond this bill

Free books for students up to VIII

Free education for women up to graduation in government and government-aided colleges. Even now,there is no tuition fee for such women but they do need to pay other charges

Fee waiver for students of families whose annual income is below Rs 5 lakh,even in private institutes of higher education and those of vocational education. At present,such scholarships are given to students of families earning up to Rs 1 lakh

Loans for farmers at 4% interest

Pension for farmers aged over 65

Old-age pension for advocates

A budgetary allocation of Rs 200 crore for an Advocate Welfare Fund. In the last SP government,Rs 122 crore was given for this fund,but the scheme was discontinued in the BSP regime

Rs 5 lakh insurance for advocates and farmers. As of now,advocates are insured for Rs 1 lakh.

Pucca shops for roadside cobblers

New avatars

Kanya Vidya dhan for high school-pass students,along with a bicycle. Savitri Bai Phule Balika Siksha Madad Yojana is already in place; any girl enrolled in XI gets Rs 15,000 and a bicycle; then Rs 10,000 in XII

Crop insurance. National Agriculture Insurance Scheme is an existing Central project and it has notified a list of kharif and rabi crops for insurance

Free motor or solar-run rickshaws. Around 55 solar-run rickshaws were distributed on Mayawati’s birthday last year and again this year under the Urban Self Employment Programme of Swarna Jayanti Shahari Rozgar Yojana,a Centrally sponsored programme. The government gives 25 per cent subsidy while the rest of the cost is provided as a bank loan

Rs 30,000 for higher education or marriage of Muslim girls after they pass matriculation. A scheme in place gives Rs 10,000 to SC families (Rs 20,000 to such families in Bundelkhand) for marriage of girls