The Congress government in Karnataka has increased the prices of petrol and diesel by Rs 3 per litre. Explaining the rationale behind the price hike, Minister for Medium and Large Industries MB Patil said that the government needs funds for its development works and for implementing the five guarantee schemes. The five guarantees are women across the state in non-AC state-run buses; 200 units of free power per month; Rs 2,000 per month for each female head of the family; 10 kg of food grains per month to BPL (below poverty line) families; Rs 3,000 per month for two years to unemployed graduates; and Rs 1,500 per month for two years to unemployed diploma holders.


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As per reports, 5.10 crore people are benefitting from these schemes costing Rs 36,000 crore to the state government. Siddaramaiah government has also allocated Rs 52,009 crore for the schemes this fiscal year. Political parties like Congress and Aam Aadmi Party (AAP) have stormed to power in Karnataka, Delhi and Punjab by promising several freebies or guarantees. Free electricity, water, bus rides and monthly allowances to women and the unemployed are some of the key guarantees being adopted by political parties, despite taking into cognizance the state's financial health. 


The State Bank of India had prepared an economic report warning against freebies and stated that they have fiscal costs and the detrimental effects of distorting prices and misallocating resources. Reportedly, SBI cited the example of Rajasthan, Jharkhand and Chhattisgarh and said that the annual pension liabilities of these states are estimated at Rs 3 lakh crore.


The petition has also been submitted to the Supreme Court about the freebies offered by political parties to lure voters at the time of election. The court made its anxiety plain about parties, which form the government by giving a pre-election guarantee of gifts and then attempting to fulfil these extravagant promises using public money. 


Freebies put an additional financial burden on the state's financial health and thus the government resorted to increasing prices of liquor, petrol, diesel, cigarettes and other items. Karnataka is latest example of that. Political parties should first prepare  a report of expected expenditure or cost to exchequer whenever they promise freebies. They should also make it clear the source of money/fund to meet these obligations if elected to power.