Making Rational Flat Tariff and Intelligent Power Supply Management Work

If power utilities undertake a refined analysis of the level and pattern of pumping by diesel pump owners in a region and shave off the potential excess pumping by

Fig. 11.4. Flat electricity tariff induces farmers to pump more.

1800

-J1400

~1200

1800

500 1

a en

400 g

Diesel pump (h)

□ Electric pump (h)

Diesel pump (number of observations)

—*— Electric pump (number of observations)

Fig. 11.5. Impact of flat tariff on average annual hours of pumping weighted by pump horsepower.

Fig. 11.5. Impact of flat tariff on average annual hours of pumping weighted by pump horsepower.

flat tariff-paying electric tube wells (as shown in Fig. 11.3) by fine-tuning power supply schedule around the year, flat tariff can become not only viable but also socially optimal by eliminating the 'waste'. The average number of hours for which diesel pumps operate is around 500-600/year. At 600 h of annual operation, an electric tube well would use 450 kWh of power per horsepower; if all the power used is off-peak load, commanding, say, 25% discount on a generation cost of Rs 2.5 ($5)/kWh, then farm power supply by the power utility would break even at a flat tariff of Rs 843.75 ($18.34)/hp/year as against Rs 500 ($10.87)/hp/ year in force in Gujarat since 1989. The government of Gujarat is committed to raise the flat tariff eventually to around Rs 2100($45.65)/hp/year at the insistance of the Gujarat Electricity Regulatory Commission; however, chances are that if it does so, farmers will unseat the government. A more viable and practical course would be to raise flat tariff to perhaps Rs 900 ($19.57) first and then to Rs 1200 ($26.09), and restrict annual supply of farm power to around 1000-1200 h against the existing regime of supplying farm power for 3000-3500 h/year. A 5 hp pump lifting 25 m3 of water per hour over a head of 15 m can produce 30,000 m3 of water per year in 1200 h of tube well operation, sufficient to meet the needs of most small farmers in the region.

Farmers will no doubt resist such rationing of power supply; however, their resistance can be reduced through proactive and intelligent supply management by the following methods:

1. Enhancing the predictability and certainty: More than the total quantum of power delivered, in our assessment, power suppliers can help the farmers by announcing an annual schedule of power supply fine-tuned to match the demand pattern of farmers. Once announced, the utility must then stick to the schedule so that farmers can be certain about power availability.

2. Improving the quality: Whenever power is supplied, it should be at full voltage and frequency, minimizing the damage to motors and downtime of transformers due to voltage fluctuations.

3. Better matching of supply with peak periods of moisture stress: Most canal irrigators in South Asia manage with only 3-4 canal water releases in a season; there are probably 2 weeks during kharif in a normal year and 5 weeks during rabi when the average South Asian irrigation farmer experiences great nervousness about moisture stress to the crops. If the power utility can take care of these periods, 80-90% of farmers' power and water needs would be met. This will, however, not help sugarcane growers of Maharashtra, Gujarat and Tamil Nadu, but then they constitute the big part of the power utility's problems.

4. Better upkeep of farm power supply infrastructure: Intelligent power supply management to agriculture is a tricky business. If rationing of power supply is done by arbitrary increase in power cuts and neglect of rural power infrastructure, it can result in disastrous consequences. Eastern India is a classic example. After the eastern Indian states switched to flat power tariff, they found it difficult to maintain the viability of power utilities in the face of organized opposition to raising flat tariff from militant farmer leaders like Mahendra Singh Tikait. As a result, the power utilities began to neglect the maintenance and repair of power infrastructure; and rural power supply was reduced to a trickle. Unable to irrigate their crops, farmers began en masse to replace their electric pumps by diesel pumps. Over a decade, the groundwater economy got more or less completely dieselized in large regions including Bihar, eastern Uttar Pradesh and North Bengal. Figure 11.6 shows the electrical and diesel halves of India; in the western parts, groundwater irrigation is dominated by electric pumps; as we move east, diesel pumps become more preponderant. The saving grace was that in these groundwater-abundant regions, small diesel pumps, though dirtier and costlier to operate, kept the economy going. But in regions like north Gujarat, where groundwater is lifted from 200 to 300 m, such de-electrification can completely destroy the agricultural economy.

Against this danger, the major advantage the rational flat tariff regime offers is in putting a brake on groundwater depletion in western and peninsular India. Growing evidence suggests that water demand in agriculture is inelastic to pumping costs within a large range. While metered charge without subsidy can make power utilities viable, it may not help much to cut water use and encourage water-saving agriculture. If anything, a growing body of evidence suggests that adoption of water- and power-saving methods respond more strongly to scarcity of these resources than their price. Pockets of India where drip irrigation is spreading rapidly - Aurangabad region in Maharashtra, Maikaal region in Madhya Pradesh, Kolar in Karnataka, Coimbatore in Tamil Nadu - are all regions where water and/or power is scarce rather than costly. Rational flat tariff with intelligent power supply rationing to the farm sector holds out the promise of minimizing wasteful use of both the resources and of encouraging technical change towards water and power saving. Our surmise is that such a strategy can easily reduce annual

I Data not available

I Data not available

1000

1000

1000 km

Fig. 11.6. Percentage of electricity-operated groundwater structures to totally mechanized groundwater structures.

groundwater extraction in western and peninsular India by 12-21 km3/year and reduce power use in groundwater extraction by about 4-6 billion kilowatt-hour of power, valued at Rs 10-15 ($0.22-0.33) billion per year.

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