Subsidies have a large part to play in the pollution in Delhi. Despite endless warnings, politicians and bureaucrats keep creating them
Delhi’s bad air in November is one result. Farmers hurry to clear the rice harvest before planting spring wheat, burning off stubble in a vast pall of acrid smoke. Rice uses a lot of water, and the region around Delhi is fairly dry, but decades ago the government began paying fat prices to push rice-growing. It also subsidised wheat, fertiliser and diesel to fuel water pumps.
So farmers pumped ever more water to grow ever more wheat and rice. With some 9m pumps, parched India now uses more groundwater than America and China combined, and holds far bigger grain stocks than it needs. Diesel’s low price also encouraged carmakers to switch to the fuel and drivers to buy it, adding yet more carcinogenic soot to Delhi’s toxic air.
Farm subsidies—amounting to some $48bn a year if government waivers on bank loans are included—skew spending away from such things as education and public health. They have also created dangerous dependence. Last year tens of thousands of farmers besieged Delhi for months, angered by reforms they thought might lead to a reduction in handouts.
Other subsidies, too, show how good intentions pave dangerous roads. Those for electricity make power more affordable, but leave the distribution network underfunded. Only 77% of electricity is paid for, piling up debts reckoned in 2019 at around $57bn. To compensate, commercial consumers pay up to four times more for power, helping make Indian manufacturers uncompetitive. Similarly, Indian Railways can afford government-imposed low passenger fares only by raising the cost of freight.
Subsidies can also bring international obloquy. A World Trade Organisation agreement required India to phase out varied export-promotion subsidies by 2016. Instead the country ramped up several programmes, earning in 2019 a sharp reprimand from the. It was chastised again this year, this time for concealing subsidies for agricultural exports.might be more sympathetic if it were to study a typical Indian election campaign, where parties vie to offer ever-higher handouts.
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