Some unpleasant arithmetic on Tamil Nadu's electricity subsidy scheme

Every household in Tamil Nadu gets 50 units per month free of charge¹. For every additional unit they consume below 500 units, they only pay ₹4–6 per unit while it costs about ₹8.5 on average to supply each unit². At the current power tariff structure, a household consuming a little less than 250 units per month effectively pays only about ₹4 per unit. Even households consuming about $\lesssim 500$ units per month pay only about ₹6.5 per unit. This works out to an implicit subsidy of about ₹1000 per month

So how poor are these households receiving thousand rupees every month from the government? Not very poor. Most households consuming 250 units per month must run at least one air conditioner. This, in a state with 12% AC penetration³, puts them in the top decile of the income distribution. Plus, a household consuming 250 units is already paying about ₹1000 per month; A household consuming 500 units is paying more than ₹3000. Another ₹1000 would be such a crippling burden on them.

But the new TVK government double downed on the power subsidy scheme to increase the free electricity from 50 units to 100 units per month. Albeit, only for households consuming less than 250 units per month. So, the current implicit subsidy is actually higher than the numbers above suggests.