Why in the News?
The Supreme Court of India criticised indiscriminate distribution of “freebies” by States while hearing a petition by Tamil Nadu Power Distribution Corporation Limited challenging Rule 23 of the Electricity Amendment Act, 2024.
Core Issue
- Petition challenges Rule 23, which limits the gap between:
- Approved Annual Revenue Requirement
- Estimated Annual Revenue from tariff
to 3%.
- Revenue gap, including late payment surcharge carrying cost, must be cleared in three yearly instalments.
- TNPDCL argues this may cause tariff shock and strain State finances.
- Tamil Nadu reportedly faces an annual power sector gap of about ₹50,000 crore.
Court’s Key Observations
- States running revenue deficits continue announcing election time largesse.
- Welfare must distinguish between needy and affluent.
- Public money should prioritise: Infrastructure, Roads, Hospitals, Schools and Medical colleges
- Court stressed fiscal prudence, especially during elections.
- Clarified that design of welfare schemes falls within the domain of elected governments.
Key Concepts for Prelims
- Revenue Deficit: Revenue expenditure exceeds revenue receipts.
- Annual Revenue Requirement (ARR): Total projected cost of providing electricity services.
- Tariff Shock: Sudden sharp rise in consumer electricity tariffs.
- Fiscal Prudence: Sustainable and responsible management of public finances.
| [2018] If a commodity is provided free to the public by the Government, then
(a) the opportunity cost is zero. (b) the opportunity cost is ignored. (c) the opportunity cost is transferred from the consumers of the product to the tax-paying public. (d) the opportunity cost is transferred from the consumers of the product to the Government. |
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
