In a move with potentially far-reaching implications, the Punjab Cabinet on Wednesday approved a pilot study for restricting the agricultural power subsidy and replacing it with cash transfers. At present, the state government is providing free electricity to farmers in the state for running their tubewells, which is not just burning a hole in the exchequer but is also held responsible for the over-exploitation and depletion of ground water reserves.
Punjab’s agricutlural power subsidy is a hot political issue and thus far, governments have preferred not to change it in anyway, even while being fully aware of the negative consequences. The Punjab Cabinet’s approval is for a study in Fategarh Sahib district, under which electricity meters are to be installed on the tubewells of 990 agriculture pumpset connections, connected to two power feeders. The farmers will be given a direct cash benefit transfer for decreasing their power consumption.
The government has identified two power feeders supplying to Chaurwala, Bhamarasi and Bhagrana in the district, where meters would be installed on the tubewels of farmers. The department of agriculture and power & irrigation will work together with the farmers in these blocks. three villages.
Fatehgarh Sahib was chosen to initiate the pilot project as farmers in this district are primarily dependent on tubewells for irrigating their fields. Also, the district is closer to Chandigarh, the state capital.
The study, to explore the viability of direct benefit transfer in lieu of free power will be conducted by the Abdul Latif Jameel Poverty Action Lab (J-PAL) South Asia, a centre in the Department of Economics, Massachusetts Institute of Technology, said a release from the government.
A memorandum of understanding was signed between the government and the centre in December “Under the pilot project, the benficiary farmers would be paid subsidy in cash based on cost of power for irrigating the crops as finalised by experts from Punjab Agrculture University, Punjab State Farmers’ Commission, along with Agriculture and Water Ressources department,” a government release said.
Assuring that this would not burden the farmers financially, the release said the farmers would be issued bills by the electricty department and allowed to retain savings of their direct cash transfers, “that is subsidy minus the bill amount”, the release said. In other words, after installation of the meter, consumption patterns will be studied, and farmers will be offered cash compensation for every unit they decrease from their normal consumption.
“This is not going to help the government to save any money, but will curb the wasteful energy consumption and help in saving of precious groundwater and promoting crop diversification,” said the release. The first phase of the study will involve 990 farm tubewells. The government foresees opposition to the move but say they will take the farmers into confidence about the benefits that will accrue to them.
“Even if we are not able to save money, we will be able to reduce pressure on the underground waters. Punjab’s underground water reserves have been over exploited and we need to take desperate measures to save it from being converted into a desert,” said a state minister on condition of anonymity. In its other decision relating to the agricultural power subsidy, the Cabinet also decided to give farmers the option of voluntarily giving up free power to the extent of 50 per cent or 100 per cent, for which they would be charged Rs 202 per BHP (British Horse Power) per month or Rs 403 per BHP per month, respectively.
Voluntary surrender of power subsidy by agriculture consumers will reduce the subsidy burden of the state, which provides 8 hours of uninterrupted power supply to farmers during the paddy season and 8-10 hours on alternate days in the non-paddy season, said a statement by the government. The entire amount on this account is borne by the state government in view of its declared policy for providing free power to Agriculture Pumpset (AP) consumers.
At present, there are around 13.50 lakh Tubewell Connections in the state. The subsidy to be paid by the state government to PSPCL in lieu of free power to AP sector is around Rs 6000 crores for financial year 2017-18 and this burden is increasing every year. The Cabinet noted that if even 1 per cent farmers voluntarily opt to give up 50 per cent of their free power supply, it would reduce subsidy burden by Rs 35 crore per annum approximately.
It was decided by the Cabinet to encourage big farmers to voluntarily give up their power subsidy. The state has several rich and influential farmers who have agriculture land of 20 acres and even more, in contrast small and marginal farmers having agriculture land of 2 acres, 3 acres and 5 acres. The Chief Minister has set an example in this regard and had also appealed to all big and well-off farmers of the state to give up power subsidy voluntarily in the larger public interest, said the government statement.