What is a freebie?

The recent discourse on freebies has raised a fundamental question, ‘What is a freebie’?

A freebie is a good or service offered by a government free to the citizens or below the cost of producing it.

It has no legal definition.

According to the Reserve Bank of India, public/merit goods that bring economic benefits such as public distribution system, employment guarantee schemes, free education and health is not a freebie but provisions such as free electricity, free public transportation, waiver of pending utility bills and farm loans may be considered as freebie.

This raises the question, 'don’t free electricity, free public transport etc. bring economic, social and environmental benefits?

Consider free public transport

Over 100 cities, as diverse as Taichung in Taiwan, Miami in the USA and Velenje in Slovenia, have made public transport free. It increases the number of public transport commuters. Recently, on free bus day, the bus ridership in Bangalore increased from 27 lakh to 35 lakh. Number of women commuters increased by 50% in Chennai after free buses were announced for women. Free public transport prevents the number of private vehicles, reduces air pollution and contributes to the city’s environment and thus people’s health. So, how can free public transport be a ‘freebie’?!

Another myth about freebie is that it is targeted toward the poor and disadvantaged. Do only the poor get subsidies?

A family of 5 with each person using 135 litres per day (LPCD) gets a subsidy of Rs. 9,500 per year from the urban water supply, says a research article by Pavan Srinath from Takshasila.

While the poor often do not have direct water connection and consumes around 60 LPCD while the rich often consume over 200 LPCD. So who is getting a higher subsidy?

What about the financial implications of freebies?

While any government scheme could have long-term financial implications, the policymakers and government must undertake a cost-benefit analysis of schemes and sources of funding must be transparent.
Argument with looking at ‘cost’ or just the ‘benefits’ is not the best way to take sides in the ‘freebie’ debate.

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