Publication - Working Paper
New research from the IGC shows that electricity theft is affected by local politics. The study by Miriam Golden from Princeton University and Brian Min from the University of Michigan looks at the northern Indian state of Uttar Pradesh – India’s most populous with over 200 million people. It finds that electricity theft is significantly greater during years when elections to the state assembly are held. It finds that the local politicians in power are much more likely to let electricity theft go unpunished close to elections so that their core supporters will re-elect them. The February 2007 elections saw 146 of Uttar Pradesh’s 403 legislators return to the assembly to represent the same constituency, and within these constituencies the rate of line losses was 33% compared to 30% in the remaining constituencies. While the study focuses on Uttar Pradesh, its findings have implications that spread much wider. The problem of electricity loss and theft in India is widespread, with Indian firms ranking electricity problems as the number one issue facing their businesses in the 2006 World Bank Enterprise Survey. In fact nearly a third of all electrical power in Uttar Pradesh (UP) is unaccounted for, due technical factors, metre tampering and theft. Although these losses have been falling over time, peaks in loss rates occurred in 2002 and 2007, which correspond to election years. Using local data on power generation and payment receipts over a 10-year period from the Uttar Pradesh Power Corporation Ltd, the researchers analysed the relationships between electricity theft and elections to the State Assembly, as well as groups in society that appear to engage in power theft. Golden and Min’s research suggests that there is a ‘political business cycle’, whereby power theft is a deliberate political strategy by incumbent state legislators during election years. The February 2007 elections saw 146 of UP’s 403 legislators return to the assembly to represent the same constituency, and within these constituencies the rate of line losses was 33% compared to 30% in the remaining constituencies. The primary beneficiaries of this strategy are well-off farmers who are allowed to exceed their allotted usage of electricity for private tubewells. These farmers are an important interest group, to whose interests state legislators are particularly sensitive. With this in mind, the politicians lower efforts by the state to monitor electricity use in periods prior to elections in return for support from well-off farmers. Agriculture is the largest economic activity in UP, accounting for nearly half of gross state product in 1991 and employing three-quarters of the labour force. Given that a quarter of the members of the UP state assembly are either under criminal indictment or have previously been convicted on criminal charges and 11% of electoral candidates in 2007 also reported criminal charges, the researchers investigated the possible link between constituencies with criminal candidates and power theft. Golden and Min found that places where people do not pay their bills seem to attract candidates with criminal records. The researchers determined that although power theft is linked to state assembly elections, both in the magnitude of theft that occurs in election years and in the electoral benefit it provides incumbents, there was no evidence that power theft represents persistent criminal linkages between politicians and landowners. Golden and Min conclude their study with concrete policy recommendations for power company officials to be detached from political influence in order to avoid power theft during election periods. Moreover, they suggest that the state government should adopt a policy of metering agricultural energy use so that owners of private tubewells pay for the electricity they use. Finally, they recommend a general policy study of the costs and benefits of the current electricity-pricing scheme, which subsidises agricultural users.