Another key area in the groundwater economy of South Asia, especially India, is the perverse energy subsidies for tube well irrigation. In the populous South Asian region, there seem no practical means for direct management of groundwater; laws are unlikely to check the chaotic race to extract groundwater because of the logistical problems of regulating a large number of small, dispersed users; water pricing and/or property right reforms too will not work for the same reasons. However, electricity supply and pricing policy offer a powerful tool kit for indirect management of both groundwater and energy use. Since electricity subsidies have long been used by governments in this region to stimulate groundwater irrigation, the fortunes of groundwater and energy economies are closely tied. India is a classic example. Today, India's farmers use subsidized energy worth $4.5-5 billion/year to pump 150 km3 of water mostly for irrigation; the country's groundwater economy has boomed by bleeding the energy economy. With the electricity industry close to bankruptcy, there are growing demands for eliminating power subsidies; but governments are unable to do so because of stiff opposition from the farmer lobby. Recent IWMI research (Shah et al., 2004c) has argued that sustaining a prosperous groundwater economy with a viable power sector is feasible, but it requires that the decision makers in the two sectors jointly explore superior options for energy-groundwater co-management. IWMI studies recognize that switching to volumetric electricity pricing may not be politically feasible at present. However, they advocate a flat tariff accompanied by better management of high quality but carefully rationed power supply to maintain at once the financial sustainability of energy use in agriculture and the environmental sustainability of groundwater irrigation. They argue that such a strategy can curtail wasteful use of groundwater in irrigation to the extent of 15-18 km3/year.
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