‘This is tax money’: Supreme Court slams poll-eve freebie culture, questions fiscal logic

The Supreme Court of India sharply criticised political parties and state governments on Thursday for announcing “irresponsible” freebies that strain public finances and asked how states, many of which are revenue deficit, could afford large subsidy commitments without prior fiscal planning. The top court also questioned the timing and fiscal logic of such decisions while hearing a matter related to electricity subsidies.

A Supreme Court bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice Vipul Pancholi asked how governments could afford large subsidy commitments without prior fiscal planning when many states are already running revenue deficits. The bench warned that such unchecked largesse could hamper the nation’s economic development.

‘Why people will work anymore if direct cash transfer schemes are announced’

The apex court observed that it was aware of instances in several states where welfare schemes were announced suddenly ahead of elections. The court also asked why people will work anymore if direct cash transfer schemes are announced.

“If governments continue to provide free money, electricity, and other amenities, who will ultimately bear the cost?” the court said, adding that the burden of freebies will ultimately fall on taxpayers.

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The bench made the remarks while hearing a writ petition filed by Tamil Nadu Power Distribution Company Ltd challenging Rule 23 of the Electricity Amendment Rules, 2024.

The court specifically asked the Government of Tamil Nadu to explain why a free-electricity scheme was announced all of a sudden, leaving power distribution companies (DISCOMs) scrambling to adjust tariffs and budget calculations. The court noted that had the subsidy been announced in advance, DISCOMs could have factored it into tariff planning and financial projections. Sudden decisions create arbitrariness and disrupt regulatory processes, it said.

It also pointed out that last-minute subsidies make it difficult for the Appellate Tribunal for Electricity and power distribution firms to accurately price electricity and maintain financial stability.

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‘Distributing freebies in this manner will hinder country’s economic development’

CJI Surya Kant said that “distributing freebies in this manner will hinder the country’s economic development. It is the state’s duty to provide facilities to those who cannot afford education or basic living. But those who are enjoying themselves are pocketing the freebies first... Isn’t this something the government should pay attention to? We know of a state where electricity is free, but even if you are a big landlord, you turn on the lights. If you need any facility, you have to pay for it. This is tax money. We’re not just talking about Tamil Nadu.”

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“We want to ask why schemes are being announced just before elections. All political parties, sociologists, and ideologies need to rethink this. How long will this continue? States are running at a loss, yet they’re still giving them away for free. If you collect 25% of revenue annually, why can’t it be used for the state’s development?” the CJI asked.

CJI Surya Kant also asked whether it was in the public interest for governments to absorb the full cost of such subsidies. The CJI cautioned that extending benefits indiscriminately, without clear eligibility criteria, could amount to an appeasement-driven approach rather than targeted relief.

“Why don’t you make budget proposals and give justification that this is my outlay on unemployment of people,” Justice Joymalya Bagchi added.