Tuesday, September 06, 2005

Demand exceed capacity yet it is Free?

A basic principle in economics states that prices are driven by demand and supply, as demand increases and supply decreases then the commodity should be sold at a premium. When the supply increases demand then the commodity should be discounted. You would think a retired Captain of Indian Armed Forces would be familiar with the principle, or may be one of his many IAS officers would advice him of the economics. Yet in the infinite wisdom Captain sahib has decided to follow the same path as his predecessor, by giving away one resource that is scarce not only in Punjab but in India, Electricity.

The decision to give away power to farmers cannot be explained by any principle of economics, it is pure and simple election year politics. Even though the elections are almost a year away, Captain Sahib is trying to secure support from farmers, despite the fact that what CM has declared to give away will not be available in sufficient supply.

While Prime Minister wants to use Nuclear option to generate more power to build the infrastructure, his own party man wants to give away what little there is. CM knows very well that this will not help the small farmers that are over burdened by debt, one motor on a small farm does not cost all that much. This will help the larger farmers like the Badal family that owns the whole village and then some, and some of the other larger families, but it will make for a great election year plank to run on.

If VAT has helped Punjab get some money in the coffers, I can suggest other uses that may be beneficial to the populace and the future generations: (1) Education (2) Roads (3) Health and Human Services (4) Information and Communication infrastructure (5) Parks and Recreation. If the people of Punjab are giving you more income, use it to raise their standard of living Captain sahib.

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