In Prime Minister Narendra Modi’s Rs 20-trillion package, power reforms are the most urgent. Electricity prices have long been political prices unrelated to costs, efficiency or morality. For decades, chief ministers took kickbacks on power contracts and forced state electricity boards (and, after the break-up of SEBs, the distribution companies or discoms) to sell electricity-free or at highly subsidised rates, to farmers and urban dwellers.
This aimed to win votes without providing the required subsidies from the budget, ruining power systems across India. High industrial tariffs were used to subsidise farmers, but the resultant costly electricity affected the competitiveness of Indian exports, a major problem today.
