Why Sikkim is thinking of Universal Basic Income

All Indian governments have more uses for money than they have revenue; is Sikkim an exception? It is not, but it expects soon to be.

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Why Sikkim is thinking of Universal Basic Income
Sikkim is mountainous, gets plenty of rain, and has abundant water running down its streams. (Photo representation: Reuters)

Sikkim Democratic Party has been in power for 23 years. It will probably sail through in the coming general elections; no serious competition to it is in sight. Pawan Chamling could well go to sleep; he has nothing to worry about.

And yet, he is planning a bold experiment when he comes back to power: he wants to introduce universal basic income (UBI). When a government gives things away, there is always a danger that some of it will go to wrong or fictitious people and make them rich without reason. Misuse and corruption are common in Indian handout programmes, for instance in food distribution schemes. The known scandals have not touched Sikkim; yet, a government has to be careful that a scheme to do something good does not lead it to lose reputation.

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But first, why is Sikkim thinking of UBI? All Indian governments have more uses for money than they have revenue; is Sikkim an exception? It is not, but it expects soon to be. It produces about a gigawatt/hour of electricity; it uses about a third, and exports half a GWh to the rest of India.

This picture will change radically over the next three years. Sikkim is mountainous, gets plenty of rain, and has abundant water running down its streams. If it dams them, it can produce a lot of hydroelectricity. Its operational capacity is 1.7 gigawatts (GW). Another 600 megawatts (MW) of power plants are under construction, and 500 MW are stalled: the guys who undertook to construct the plants stopped, presumably because they could find no market. A year has 8760 hours, so a watt of power capacity can produce 8.76 kilowatthours (kWh) of electricity; 1.7 GW, 600 MW and 500 MW translate into 14.9, 5.3 and 4.8 terrawatthours (TWh) of annual productive capacity 24.5 TWh altogether. Supposing a fifth of it would be lost in transmission, maintenance, etc, it has 20 TWh of power to sell. It consumes roughly 1.5 TWH. Surprisingly, about a half of it is produced from coal: Sikkim is connected to the power network of eastern India, and simply takes what power it needs from West Bengal. Supposing it used its own power and raised its consumption to 2 TWH, it would have 18 TWH to sell.

The wholesale price of power fluctuates enormously: the price on Indian Electricity Exchange may be Rs 1500 per MWh at 3 o’clock in the morning when everyone is fast asleep, and Rs 4500 at 8 o’clock in the evening when everyone is watching television. If Sikkim got Rs 3000 on average, it could sell 18 TWH for Rs 54 billion roughly Rs 84000 for each of the 650,000-odd Sikkimese. That would be enough to give every Sikkimese Rs 7000 a month. It is not princely but may be decent pocket money. It could go up if Sikkim could sell electricity at a better price.

Once it sees the potential, Sikkim will seek expert assistance, or will be offered it by big brother India; its experts are very likely to be economists. They will advise Sikkim to put the money to good use such as to finance education or health care and to give it to deserving people, for instance, the poor, or women. Policing the use of the money will call for an elaborate administrative structure on the Indian civil service model; its cost will use up a large proportion of the money. To my mind, this will be more of what India has done for years, with no great success.

So I would advise Sikkim to keep Indian experts out, ask the Registrar of Population to set up machinery to record every citizen from birth to death, and give each citizen the UBI unconditionally every year. It should then research how the citizens spend their windfall; that would tell us much about what people themselves value. But first, Sikkim had better get down to generating and selling all that electricity.