Published on August 2023 | Environment, Sustainability and Development

Exploring therelationship betweenexpenditure onpower andstate finances: anempirical study inJammu andKashmir, India

Globally, there is a growing momentum toward achieving universal access to clean energy, particularly electricity, as it plays a crucial role in improving the overall quality of life. Addressing the challenge of universal electricity access requires the development of various mechanisms that enable individuals to access electricity at affordable rates while having the freedom to choose their service providers. In many countries, governments are actively involved in enhancing electricity access, but this effort can put strain on state finances, leading to increased fiscal deficits. This paper aims to investigate the relationship between power expenditure and state finances in Jammu and Kashmir, India, in light of the push for improved electricity access. Using data from the RBI Bulletins for the period 1990–91 to 2019–20, the paper employs panel data analysis to investigate the relationship between power expenditure and gross fiscal deficit. Results indicate a positive and significant correlation between expenditure on power and state gross fiscal deficit in Jammu and Kashmir, indicating lower fiscal sustainability with higher power expenditure. For the purpose of reducing the pressure on state finances caused by enormous domestic power subsidies, the study recommended targeted subsidies with a focus on small energy projects utilizing renewable energy sources and energy-saving technologies, as well as incentives and regulations to promote energy conservation.