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Definition: Subsidies are benefits which are usually provided by a government to people, institutions, or companies.
When individuals, institutions, or firms face some sort of a problem, then their government can make a payment to them (usually in the form of cash or a rebate) to make things easy for them. Such payments are called subsidies. For example, the state government of Delhi started providing a power subsidy to households in the capital a few years ago. Currently, under this subsidy, the state government provides free electricity to those households with a power consumption of less than 200 units a month. However, for households that consume 201-400 units of power a month, the government provides a 50% subsidy on their power bill, which means their electricity bill is reduced by 50%. When analysing a subsidy, we need to examine how important it is for a government to provide that subsidy. Whether a government is genuinely providing a subsidy to needy sections of society or it is providing a subsidy just to get votes.
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