Free utility services come at a hidden cost: CEA Nageswaran

New Delhi, Aug 3 (SocialNews.XYZ) Chief Economic Advisor (CEA) V Anantha Nageswaran on Monday cautioned against the growing reliance on 'free services' in public policy, arguing that below-cost pricing of utilities and infrastructure ultimately weakens economic balance sheets and undermines long-term development.

Speaking at the CII Tamil Nadu Infrastructure Summit 2026, Nageswaran said providing public services below their economic cost creates distortions that are eventually borne either by taxpayers or through the deterioration of assets.

"Free is the most expensive word in public policy," he said.

Nageswaran further stated that building infrastructure on the promise of below-cost services was inherently contradictory. The CEA noted that pricing essential services such as water at zero often leads to overconsumption and waste, as consumers begin to treat scarce resources as unlimited.

Questioning the argument that underpricing utilities serves as a social safety net, Nageswaran said such policies frequently benefit households that already have access to services while leaving the most vulnerable segments underserved.

According to him, people without access to piped water often end up buying water from private suppliers at rates significantly higher than standard utility charges.

He argued that honest pricing would enable governments to provide targeted support to vulnerable groups while ensuring utilities generate enough revenue to maintain and expand infrastructure networks.

The illusion of free infrastructure always has a hidden cost, according to him.

Explaining the economics of infrastructure financing, he said that someone eventually pays for every service -- either users through tariffs, taxpayers through subsidies, or infrastructure assets through neglect and inadequate maintenance.

The CEA also stressed that sustainable pricing is critical for attracting long-term investment.

While highlighting India's economic resilience, including GDP growth of 7.7 per cent and a sharp increase in government capital expenditure, Nageswaran said public spending alone cannot sustain growth indefinitely.

Source: IANS