AAP’s focus on transparency, participatory approaches and action against corruption and the VIP culture is one thing, its economic policy is another. Yogendra Yadav, believed to be the driver behind AAP’s economic principles, has recently said that APP is “socialist”, but not “left-wing”. Both are imprecise expressions. Legally, any political party registered in India has to be “socialist”. That apart, I would interpret both socialism and left-wing as: (1) a belief in government-driven delivery; and (2) a belief in government intervention. For the three main items of electricity, water and education, as opposed to the other AAP planks of transparency, participation and anti-corruption, AAP is clearly left-wing. Take for instance the question of government schools. Today, there are around 1000 “government” schools in Delhi and their quality is palpably inferior to that in “private” schools. It isn’t so much a question of whether one can deliver 500 additional government schools or not, given land and teacher constraints. (The earlier government thought at an increment of 100 was at best possible.) Is the objective government schools, or is the objective better educational outcomes for children, including the poor? There are means of ensuring better educational outcomes, without necessarily setting up more government schools. This confusion between means and ends characterizes all experiments with socialism and AAP is no different.

The electricity and water issue is no different. Both power and water have economic costs of delivery. Many poor people in Delhi have access to neither, at least in the legal way. There is already privatized supply of both in “slums”, at prices at par, and sometimes considerably higher, than what richer people pay. Yes, there is an inclusive agenda of improving distribution and ensuring delivery. But it’s not fundamentally a price issue. While there are slabs (there is one for power and 50% cuts will be on that, water has been pegged at 700 litres per household), the broad intention is to reduce prices artificially. Incidentally, very few “rich” households get that 700 litres per day. Anything beyond improved distribution and curbing leakages is tantamount to forcing down prices artificially. This has three consequences. First, it leads to distortions in demand. Because of power subsidies, there are anecdotes about cattle being kept in air-conditioned sheds in Punjab. If I get 700 litres of free water per day, I am much more inclined towards wasting it on washing my car. Second, as experiences with socialism world-wide have shown, artificially low prices leads to shortages.

There was a time when Delhi suffered from both power and water shortages. Both have disappeared. This isn’t entirely because of higher tariffs alone, but higher tariffs have made supply more viable. Third, the only way to ensure low prices and avoid shortages is to subsidize through government budgets. As the petroleum example shows, such subsidies actually make the pricing and budgetary exercise less transparent. But more importantly, does Delhi government possess the resources to subsidize power and water delivery, even if those subsidies are unwarranted? That’s the wrong question to ask. There are always resources. The question is opportunity costs of those resources. Something spent in one sector can no longer be spent somewhere else. The problem is that the average voter, with perhaps a fondness for everything “free”, does not realize the inherent trade-offs. Most Delhi residents will probably argue that in addition to power and water, what’s improved in Delhi in the last 15 years is transport infrastructure. This didn’t descend like manna from heaven. If resources are now spent on subsidizing power and water, this means they won’t be spent on improving transport infrastructure.

There can be no quarrels with that, since AAP has obtained an electoral mandate to do that. However, if at some future date, some other government wishes to roll this back, there will be two problems as a legacy. First, any messing around with prices makes systems non-transparent and complicated. Second, once there are subsidies, freebies are difficult to reverse. One tends to forget, but there was considerable resistance to hiking power and water rates in Delhi. When seeds of socialism are sown, it is future generations that suffer the weeds.