New era of pervasive agricultural subsidies?

M Dinesh Kumar / A Narayanamoorthy | Updated on August 13, 2019

The attempt to use power subsidy to control groundwater withdrawals, as in Punjab, ignores certain ground truths

Managing India’s groundwater has become a big challenge for policymakers. Over the years, the challenge has become very complex, with political economy taking dominance over hard science. Since groundwater overdraft is also linked to subsidised power supply to agriculture, researchers had explored how the mode of electricity pricing supplied to agriculture could be changed to control groundwater abstraction and to achieve the goals of efficiency, equity and sustainability.

The most frequently suggested instrument for controlling groundwater draft was the metering and pro-rata pricing of electricity.

In India, there is a large body of research which raises scepticism about the viability of metering irrigation pumpsets, claiming that it is political suicide for any government to even think about installing meters in farmers’ field, and that whenever it did do so, it led to fall of the government.

However, there was no reality check on this claim. A study by the World Bank in 2001 in Punjab and Haryana showed that farmers are willing to pay for electricity if quality power supply is assured. More curiously, even after the government in West Bengal successfully introduced pro-rata pricing of electricity in the agriculture sector in 2006, this false narrative continues.

Electricity pricing conundrum

An idea which came from a prominent research group recently is direct delivery of power subsidy to agriculture. The idea was to make sure that farmers get free power, but the power utility reduces its subsidy burden gradually by incentivising the farmers to use less electricity, thereby saving both groundwater and electricity. It involves metering of agricultural power connections, but no metered tariff.

This model, adapted by the power utility of Punjab, involves offering cash incentives to well-irrigating farmers who use less than a designated quota of electricity each season. The individual’s quota is decided on the basis of the connected load and the season. For one HP of connected load, a farmer is entitled to 200 units a month during the kharif season and 50 units per month during the winter.

The farmer gets a cash incentive of ₹4 for every unit of electricity saved. This pilot project implemented in 135 farms across Punjab, has shown reduced electricity consumption by around 60 per cent of the farmers, while nearly a third of the farmers had increased electricity consumption even after accepting the scheme. The claim is that the farmer had ‘saved’ electricity and the corresponding groundwater equivalent. To know the validity of this claim, we should know the rationale behind fixing the quota based on the connected load.

Chosen capacity

In a given year, season and locality, the power demand will be a function of the cropped area and cropping pattern. Hence the rationale of fixing the quota on the basis of connected load can be said to be ‘sound’ only if the farmers have correctly chosen the pump capacity, taking into consideration the actual quantum of energy required for irrigating farm and the number of hours that the power supply is available. But this may not be the case in reality.

Possibly, many resource-rich farmers have chosen over-sized pumps. In such cases, their energy quota will be much higher than what is required to irrigate the plot even at the current excessive levels of dosage. The reason for maintaining the high-level of irrigation dosage could be that it can be rewarding from an economic perspective as it might result in yield improvement, whose value is more than the economic incentive they get by saving water.

Hence, these resource-rich farmers will be able to keep their power consumption much below the allocation or ‘quota’ while continuing with inefficient irrigation, and yet be able to claim the cash incentive; whereas a resource-poor farmer, who has a low-capacity pump might end up using the full quota of energy or even more. Ideally, the ‘energy quota’ for deciding on the incentive should have been fixed on the basis of the actual land holding cultivated by the farmer during a particular season which determines the water and energy requirements for irrigation. The point is that the current subsidy structure may not create any special incentive to save either electricity or groundwater in Punjab.

Now, for the time being, let us assume that the farmers are really saving energy by reducing groundwater pumping through efficient irrigation methods. Will this help conserve groundwater in Punjab? The answer to this question lies in a nuanced understanding of the State’s groundwater balance.

It is quite well-known that the irrigated paddy fields as well as rainfall contribute to the recharging of shallow groundwater during the monsoon season in alluvial Punjab. Therefore, groundwater storage change is the net effect of the gross draft and the ‘total recharge’, the latter being the sum of rainfall infiltration and irrigation return flows. The gross abstraction equals the water consumed by crop added with the soil moisture depletion after crop harvest, soil moisture storage and the deep percolation or irrigation return flows.

Therefore, reducing the gross draft might only result in a reduction of return flows and change in moisture storage, so long as the farmers don’t choose a crop or variety with lower evapo-transpirative requirement, which is unlikely as it might lead to yield reduction.

Wasteful attempt

But the people who designed the project seem to be completely unaware of this. Only a fraction of the total water applied (around 1,200 mm) to the field for kharif paddy actually gets consumed by the crop. Since the evapo-transpirative demand for kharif paddy in Punjab is around 450-480 mm, the rest of the water is available as return flows to groundwater. Hence, even if the farmers reduce the amount of water applied to irrigated paddy fields to reduce electricity consumption, there won’t be any groundwater saving.

One wonders how on earth the farmers are offered a heavy cash incentive of ₹4 for saving a unit of electricity, while the actual cost of supplying it (₹5.12/unit) is only a little more than that.

Instead of offering cash incentive for the fictitious power saving, the agency should start working on establishing (volumetric) water use rights amongst the groundwater users, fix equivalent energy quota, and then start monitoring groundwater and electricity use.

No doubt, these are extremely difficult measures and would require great degree of coordination among various departments — water resources, electricity and agriculture. But once they are initiated, there won’t be any need for promoting efficient irrigation technologies and water-efficient crops. Farmers will take up these measures on their own, without any subsidy support.

Kumar is Executive Director, Institute for Resource Analysis and Policy, Hyderabad. Narayanamoorthy is Senior Professor, Department of Economics and Rural Development, Alagappa University, Tamil Nadu. Views are personal.

Published on August 13, 2019

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