The Supreme Court (SC) was hearing a petition filed by the Tamil Nadu Power Distribution Corporation Limited, which proposed providing free electricity to all, irrespective of financial status, in the poll-bound state. 

Freebies, highlighted in the election manifestos of most political parties, have once again drawn the ire of the apex court, which has taken exception to the practice that burdens the exchequer and the taxpayer, ultimately hindering development.

Freebies are doles given out by political parties before elections — and sometimes continued for five years — to garner votes. They can range from free foodgrains, water, and electricity, to unconditional cash transfers (UCTs) and free gold and bicycles. 

In the 1950s, political parties in Tamil Nadu devised this exorbitant election strategy. Gradually, it was adopted by other state- and national-level parties.

In July 2022, Prime Minister Narendra Modi dubbed the strategy “Revdi culture”, slamming parties such as the Congress and Aam Aadmi Party (AAP) for trying to consolidate votes by distributing freebies.

SC Slams Freebies Culture

The petition by the Tamil Nadu Power Distribution Corporation Limited requested that the SC strike down Rule 23 of the Electricity (Amendment) Rules, 2024, which stipulates that the gap between the cost of supplying power and the tariff recovered from consumers must not exceed 3%. 

The SC observation again highlights the malaise of freebies. 

Firstly, freebies, diametrically opposite to welfare schemes such as free education, healthcare, and midday meals, are a massive burden on the exchequer. The practice, especially UCTs, which are neither based on the beneficiary’s performance nor on how the cash is used, is all the more glaring when states short of revenue targets distribute it for votes. 

According to the Economic Survey 2025-26, the revenue balance of 18 states deteriorated between FY19 and FY25 (provisional accounts): ten states slipped from a revenue surplus to a deficit, five slipped further into the red, and only three states recorded a revenue surplus. Overall, the number of states in revenue surplus decreased from 19 to 11.

Fiscal Transfer From Centre To States

Despite fiscal transfers from the Centre to the states increasing from ₹11.5 lakh crore to ₹25.6 lakh crore between FY20 and FY26 (Budget Estimates or BE), the lack in revenue growth of these states was “compounded by the incurring of expenditures such as discretionary UCTs".

The aggregate spending on UCTs, especially for women, is estimated at a staggering ₹1.7 lakh crore for FY26.

The number of states distributing cash has galloped more than fivefold between FY23 and FY26, despite around 50% of them being estimated to be in a revenue deficit.

Juxtaposing the distribution of UCTs by such states and their fiscal constraints shows a jarring reality. The fiscal deficit of these states increased from 2.6% of the GDP in FY22 to 3.2% in FY25.

Unconditional Cash Transfers

Earlier this month, the 16th Finance Commission specifically mentioned BJP-ruled Maharashtra and Odisha, and the Opposition-ruled Jharkhand, for the highest UCT schemes.

The Commission’s report (2026–31) states that UCTs account for 20.2% of the total subsidy spending in the 2025–26 (BE), rising from a mere 3% in 2018-19.

Maharashtra’s spending on UCTs jumped from 0.6% of total revenue expenditure in 2023-24 to 6.2% in 2025-26 (BE), Odisha from nil to 5.1%, and Jharkhand from 0.8% to 13%.

The problem isn’t restricted to UCTs.

Freebies also include free water and electricity during any ruling party’s entire term.

Fiscal Health Index

For example, according to the NITI Aayog’s Fiscal Health Index (FHI), Odisha has a score of 67.8 (first) and Punjab 10.7 (last). Despite having the lowest FHI, Punjab has been providing 300 units of free monthly electricity to domestic consumers, and this rose to 600 units, resulting in zero electricity bills for 90% of households. 

Moreover, akin to Delhi during the AAP government, women in Punjab avail free bus travel, which costs the state transport undertakings crores, with around three lakh women availing the facility daily.  

A state’s economic growth is ensured not only by the Centre’s fiscal transfers but also by their proper deployment and discipline. Capital expenditure is at the core of per capita income growth.  

States that deploy resources on infrastructure, education and health, and generate employment, grow. Consequently, household incomes and living standards improve. 

On the other hand, states that don’t allocate a substantial portion of their developmental expenditure to capital expenditure and deploy resources on freebies and other short-sighted welfare schemes, despite fiscal constraints, continue to borrow and come under serious debt.

Short-Term, Populist Measure

Secondly, freebies provide only immediate relief, hindering sustainable development in the long run. Instead of initiating schemes that generate employment, build infrastructure and improve education and health, states distributing freebies waste resources on populist measures.

If a substantial portion of the budget is allocated to freebies, the targeted section of the population has the means only for immediate consumption, and not for the long run. It fosters a culture of dependency in which the beneficiary becomes reliant on government doles and doesn’t contribute to the GDP. 

For example, Punjab’s Gross State Domestic Product (GSDP), at current prices, stood at ₹83.864 crore in 2024-25. Punjab was in the second spot on the list of the bottom 10 states in GSDP, according to the RBI Handbook of Statistics on Indian States. Therefore, the Punjab government’s decision to dole out freebies is illogical.

Need For Long-Term Initiatives

Thirdly, freebies provide only momentary support to the poor. It does not remove the root causes of poverty and inequality. 

Providing proper education, health schemes, and employment opportunities to the poor is the best way to combat poverty. 

Freebies are not the way to long-term development and growth.

As the apex court observed on December 9, 2024: “For how long can freebies be given? Why don’t we work towards creating job opportunities, and capacity building for migrant workers?”

(The writer is a columnist with more than two decades of experience in journalism. Views are personal.)