Sectoral Policy Perspectives

Groundwater policymakers face conflicting challenges in managing this chaotic economy in different areas. Particularly after 1970, agrarian growth in the region has been sustained primarily by private investments in pump irrigation. However, the development of the resource has been highly uneven. In the groundwater-abundant Ganga-Brahmaputra-Meghana basin - home to 400 million of the world's rural poor in Bangladesh, Nepal Terai and eastern India -groundwater development can produce stupendous livelihood and ecological benefits (Shah, 2001). However, it is precisely here that it is slow and halting. In contrast, Pakistan Punjab as well as India Punjab, Haryana and all of peninsular India are rapidly overdeveloping their groundwater to a stage where agriculture in these parts faces serious threats from resource depletion and degradation. The priority here is to find ways of restricting groundwater use to make it socially and environmentally sustainable. In stimulating or regulating groundwater use as appropriate, the tools available to resource managers are few and inadequate. Regulating groundwater draft and protecting the resource is proving far more complex and difficult. Direct management of an economy with such a vast number of small players would be a Herculean task in most circumstances. In South Asia, it is even more so because the groundwater bureaucracies are small, ill-equipped and outmoded. For instance, India's Central Ground Water Board, which was created during the 1950s for monitoring the resource, has no field force or operational experience and capability in managing groundwater. Direct management of groundwater economy will therefore remain an impractical idea for a long time in South Asia.

This makes indirect management relevant and appealing; and electricity supply and pricing policies offer a potent tool kit for indirect management provided these are used as such. Regrettably, these have so far not been used with imagination and thoughtful ness. In the groundwater-abundant Ganga basin, favourable power supply environment can stimulate livelihood creation for the poor through accelerated groundwater development; but as described later in this chapter, this region has been very nearly de-electrified (Shah, 2001). Elsewhere, there is a dire need to restrict groundwater draft as abundant power supply and perverse subsidies are accelerating the depletion of the resource. All in all, power supply and pricing policies in the region have so far been an outstanding case of perverse targeting.

A major reason for this is the lack of dialogue between the two sectors and their pursuit of sectoral optima rather than managing the nexus. The groundwater economy is an anathema to the power industry in the region. Agricultural use accounts for 15-20% of total power consumption; and power pricing to agriculture is a hot political issue. In states like Tamil Nadu, power supply to farmers is free; and in all other states, the flat electricity tariff - based on horsepower rating of the pump rather than actual metered consumption -charged to farmers is heavily subsidised. Annual losses to electricity boards on account of power subsidies to agriculture are estimated at Rs 260 ($5.65) billion in India; and these are growing at a compound annual growth rate of 26% (Lim, 2001; Gulati, 2002). If these estimates are to be believed, it will not be long before power industry finances are completely in the red. These estimates have, however, been widely contested; it is found that SEBs have been showing their growing T&D losses in domestic and industrial sectors as agricultural consumption, which is unmetered and therefore unverifiable.6 However, the fact remains that agricultural power supply under the existing regime is the prime cause of the bankruptcy of SEBs in India.

As a result, there is a growing movement now to revert to metered power supply. The power industry has been leading this movement from the front; but international agencies - particularly, the World Bank, the US Agency for International Development (USAID) and the Asian Development Bank (ADB) -have begun to insist on metered power supply to agriculture as the key condition for financing new power projects. The Central and State Electricity Regulatory Commissions have been setting deadlines for SEBs and governments to make a transition to universal metering. The Government of India has resolved (i) to provide power on demand by 2012; (ii) to meter all consumers in two phases, with phase I to cover metering of all 11 kVA (kilovolt-ampere) feeders and high tension consumers, and phase II to cover all consumers; and (iii) to install regular energy audits to assess T&D losses and eliminate all power thefts as soon as possible (Godbole, 2002). This is an ambitious agenda indeed. However, all moves towards metered power consumption have met with farmer opposition on unprecedented scale in Andhra Pradesh, Gujarat, Kerala and in other states of India. All new tube well connections now come with metered tariff; and most states have been offering major inducements to tube well owners to opt for metered connections. Until it announced free power to farmers in June 2004, Andhra Pradesh charged metered tube wells at only Rs 0.20-0.35 ($0.4-0.7)/kWh, and Gujarat and several other states charged up to only Rs 2180.50-0.70/kWh against the supply cost of Rs 2.50-3.80 ($5-8)/kWh. In a recent move, the Gujarat government has offered a drip irrigation system free to any farmer who opts for metering.

Yet, there are few takers for metered connections; instead, demand for free power to agriculture has gathered momentum in many states.7 Farmers' opposition to metered tariff has only partly to do with the subsidy contained in flat tariff; they find flat tariff more transparent and simple to understand. It also spares them the tyranny of the meter readers. Moreover, there are fears that once under metered tariff, SEBs will start loading all manner of new charges under different names. Finally, groundwater irrigators also raise the issue of equity with canal irrigators: if the latter can be provided irrigation at subsidized flat rates by public irrigation systems, they too deserve the same terms for groundwater irrigation.

Despite this opposition, power industry persists in its belief that its fortunes would not change until agriculture is put back on metered electricity tariff. Strong additional support to this is lent by those working in the groundwater sector where it is widely, and rightly, held that zero and flat power tariff produce strong perverse incentives for farmers to indulge in profligate and wasteful use of water as well as power because it reduces the marginal cost of water extraction to nearly zero. This preoccupation of water and power sector professionals in aggressively advocating reversion to metered tariff regime - and of farmers to frustrate their design - is, in our view, detracting the region from transforming a vicious energy-irrigation nexus into a virtuous one in which a booming, and better managed, groundwater-based agrarian economy can coexist with a viable electricity industry.

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