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Free Power, Irrigation and Groundwater Depletion: Impact of the Farm Electricity Policy of Punjab, India

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  • Disha Gupta

    (Department of Economics, Delhi School of Economics)

Abstract

This paper provides causal evidence of the impact of a change in the policy regime from flat rate to free farm electricity pricing, introduced in Punjab, India in February 1997 using a difference-in-differences framework. Based on village-level data from the second and the third rounds of the Minor Irrigation Census, the study finds a differential increase in the number of electric-operated tubewells and horsepower load of pumps in Punjab as compared to an agriculturally-similar and neighbouring state, Haryana, which is taken as the control group. Through these channels, the study finds that percentage deviation in groundwater depth from its mean in the baseline period increased by 16 per cent more in Punjab. Nationally-representative well-level data on groundwater depths from Central Ground Water Board shows impact heterogeneity with sharper effect on groundwater depth for wells that are lying closer to the cut-off of about 10 meters where a technological shift from centrifugal to submersible is required to maintain access to groundwater pumping. Key Words: Water Pricing, Power Subsidies, Groundwater Depletion, Irrigation,Agriculture JEL Codes: O13, Q18, Q25, Q48

Suggested Citation

  • Disha Gupta, 2021. "Free Power, Irrigation and Groundwater Depletion: Impact of the Farm Electricity Policy of Punjab, India," Working papers 316, Centre for Development Economics, Delhi School of Economics.
  • Handle: RePEc:cde:cdewps:316
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    References listed on IDEAS

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    1. Sheetal Sekhri, 2014. "Wells, Water, and Welfare: The Impact of Access to Groundwater on Rural Poverty and Conflict," American Economic Journal: Applied Economics, American Economic Association, vol. 6(3), pages 76-102, July.
    2. Meenakshi, J. V. & Banerji, A. & Mukherji, Aditi & Gupta, A., 2012. "Does marginal cost pricing of electricity affect groundwater pumping behavior of farmers?. Project report submitted to International Initiative for Impact Evaluation (3ie) by IWMI," IWMI Research Reports H044958, International Water Management Institute.
    3. Sarkar, Anindita, 2020. "Groundwater irrigation and farm power policies in Punjab and West Bengal: Challenges and opportunities," Energy Policy, Elsevier, vol. 140(C).
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    7. Banerji, A. & Meenakshi, J.V. & Khanna, Gauri, 2012. "Social contracts, markets and efficiency: Groundwater irrigation in North India," Journal of Development Economics, Elsevier, vol. 98(2), pages 228-237.
    8. Sheetal Sekhri & Sriniketh Nagavarapu, 2013. "Less Is More? Implications of Regulatory Capture for Natural Resource Depletion," Virginia Economics Online Papers 408, University of Virginia, Department of Economics.
    9. Singh, Karam, 2012. "Electricity Subsidy in Punjab Agriculture: Extent and Impact," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 67(4), pages 1-16.
    10. Ram Fishman & Upmanu Lall & Vijay Modi & Nikunj Parekh, 2016. "Can Electricity Pricing Save India’s Groundwater? Field Evidence from a Novel Policy Mechanism in Gujarat," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(4), pages 819-855.
    11. Sidhu, Balsher Singh & Kandlikar, Milind & Ramankutty, Navin, 2020. "Power tariffs for groundwater irrigation in India: A comparative analysis of the environmental, equity, and economic tradeoffs," World Development, Elsevier, vol. 128(C).
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    More about this item

    Keywords

    water pricing; power subsidies; groundwater depletion; irrigation; agriculture jel codes: o13; q18; q25; q48;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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