Finance Commission Exposes Regressive Electricity Subsidies in Tamil Nadu: Wealthier Households Benefit Disproportionately

The 16th Finance Commission has identified significant structural flaws in Tamil Nadu's electricity subsidy program, revealing a regressive distribution that disproportionately favors higher-consumption households. Analysis indicates that over 23 million consumers receive free electricity for up to 100 units bimonthly, regardless of actual consumption levels, creating an inefficient allocation of public resources. This universal benefit approach fails to target economically vulnerable populations effectively, instead channeling substantial subsidies to households with greater financial capacity. The Commission's findings highlight a critical policy misalignment where intended social welfare mechanisms inadvertently reinforce existing economic disparities. Such blanket subsidies not only strain state finances but also undermine energy conservation efforts by removing price signals for responsible consumption. The report suggests that more targeted interventions, potentially based on income thresholds or consumption patterns, could achieve greater equity while optimizing fiscal expenditure. This revelation comes at a crucial juncture as states balance social protection with fiscal sustainability, with implications for electricity subsidy reforms nationwide.