The Tamil Nadu government's decision to implement the new measure of providing mineral water to the poor at a highly subsidised price of Rs 10 is at best a superficial move aimed at easing the problem of poverty. This pronouncement reminds me of yet another welfare scheme implemented widely across Tamil Nadu. Under the garb of providing affordability to the poor struggling to meet ends in an inflationary environment, the state effectively placed a ceiling of Rs 120 on cinema ticket prices. This was done without considering the existing prohibitive business, administrative costs and the resulting losses incurred by multiplexes or the potentially deleterious effects on stakeholders - producers, directors, distributors etc.
The effects of subsidising mineral water will be similar. The subsidies will have to be paid for through tax hikes or borrowing. This will mean upsetting the middle class while also risking a high fiscal deficit. The cost of welfare economics markedly outweighs its benefits. The Tamil Nadu government must let market forces determine prices. Creating price distortions is simply bad economics.
Harsh Vora, Vadodara
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