RK Singh has Warned of Falling into a Debt Trap if Borrowed Money is used for Free Electricity Provision

09 Apr 2024

Power Minister RK Singh has issued a warning regarding the potential danger of ensnaring states such as Punjab in debt traps by utilising borrowed funds to provide free electricity, stating that such populist schemes are only viable when the state possesses adequate financial resources.

Electricity, like any other commodity, has a cost of production, and if a state is required to provide it for free to a section of consumers, it will also need to pay the production utility. If the generating utility is not paid, then electricity will not be produced.

During an interview, Singh stated that he has been telling states that electricity is not free. He said, "If a state wishes to provide free electricity to any section of the population, they are free to do so, but they will have to pay for it." Nonetheless, states with an existing high level of debt are resorting to such populist measures, necessitating them to borrow more to cover their utilities, ultimately leading to a debt trap.

The minister said that you should not bring your state into a situation where it gets trapped in the debt trap. Many states have fallen into debt traps due to free facilities.