Resource information
After almost a decade of high-level
effort to bring the charges (tariffs) that farmers pay for
electricity more nearly into line with the costs of supply,
India has barely made a dent in the longstanding and
increasingly uneconomical practice of subsidizing power to
agricultural consumers for irrigation. Progress has been
slowed by the understandable but misplaced concern that
higher tariffs would harm farmers--and that the injured
parties would take political revenge on the reformers. This
study seeks to dispel that anxiety. It is the result of a
joint effort by the Bank and the states of Haryana and Adhra
Pradesh , both of which have begun raising the price of
electriicity to agriculture. Its central contribution to
policy discussion is the detail in which it documents the
costs--ususally neither acknowledged nor clearly defined--to
farmers in those states of subsidies that actually harm
agricultural operations more than they help as well as the
benefits that the farmers would get from improved quality of
electricity services. The costs--in power outages, damaged
pumping equipment, irrigation foregone because of power
losses, distorted investment patterns, among others--exact a
heavy toll from ordinary farmers. In the form of deficits,
the subsidies also sap state budgets of funds that could
otherwise be invested in rural infrastructure, extension
services, and advanced agricultural technology. As
unrecovered costs, they starve suppliers of funds for
maintenance and improved service. On the other side of the
coin lie the benefits that reliable flows of power and good
quality of other electricity services could deliver to rural India.
